If you ask any investment adviser when the best time to start investing is, the answer will always be "Yesterday," and they're not wrong. Having said that, it often doesn't feel as easy as it sounds. One of the reasons women do well when they invest is that they give it thought and consideration before they jump in. But the jumping in may be the hardest part.

So, if you are already busy juggling a career, social and home life, trying to fit in some self-care and not drop any balls, how do you simply 'start investing' and know that you have done it right?

In my experience, millennials are already pretty good at managing their finances; however, they've never had KiwiSaver properly explained to them, much less any other investment options. The idea of asking for help, or worse, not asking and doing it wrong, can be a sufficient reason to put it in the "too hard" basket.

Putting aside any analysis of the markets, there are two main objections I come across as an adviser when it comes to setting up an investment fund, and my reasons why you should still do it.

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Objection One: You're focusing on the mortgage right now.

For a lot of Kiwis, getting a house has been the focus for so long, often with the idea that once you have it, you will pay it down as fast as possible. For many of us, debt can be frightening, particularly when the average house price in 2021 hit $1 million. As a conservative person myself, my approach in the past would've been to throw everything I had at the mortgage. There are plenty of mortgage brokers and advisers out there whose business model is cantered on exactly that.

But...what about diversification and risk mitigation?

If you have taken all your savings and all your KiwiSaver and used them to get a house, and then every dollar you don't spend is also going into that house, your financial position is made up entirely of property. There is no diversification in that approach. While you may pay less in interest over the term (which is great), you also haven't grown your money other than potentially through capital gains.

The lack of liquidity (can I spend the money tomorrow) and diversification (are all my eggs in one basket) are the risks we run when all our money is tied up in property, especially in one property.

I could go into detail about the compound interest returns you are missing out on when you simply pay the mortgage, or I could elaborate on the implications that severe weather events can have on your property and, therefore, your entire net worth. But the upshot is that having all your eggs in one basket is never a good plan, especially when that basket is prone to earthquakes!

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Objection 2: You're already paying more than 3% into KiwiSaver.

For many of us, either in the lead-up to buying a first home or sometimes to build the KiwiSaver back up after having used the funds, we will contribute at a higher rate to KiwiSaver. My advice is that unless your employer is matching that higher rate, this is the wrong place to invest. If you're buying a house in the next 6-12 months, your KiwiSaver is probably already sitting in cash or a very conservative fund. In that case, your savings account won't be doing too differently and will have the advantage of being accessible for emergencies. If you've already bought your first home, and your KiwiSaver is now not going to be touched until age 65, you absolutely want any investable wealth (beyond your minimum 3%) to be accessible to you.

But… what about access to funds?

The problem with KiwiSaver is that your money stays locked in until you retire.

How is a managed fund different?

The term 'managed fund' may put some people off; however, what many Kiwis don't realize is that KiwiSaver investing, and managed funds investing, are essentially the same beast.

KiwiSaver is simply a managed fund with extra Government regulations applied. Those regulations state you can’t take your money out until retirement.

The good news is that many KiwiSaver providers will also offer the ability to invest outside of KiwiSaver into non-KiwiSaver managed funds, applying equal amounts of care and due diligence and similar investment strategies to those funds as they already do with your retirement funds.

These ‘outside’ managed funds are the same type of investments as your KiwiSaver managed fund would invest in: some cash, fixed interest (that's your bonds and term deposits), equities (that's the share market), and property. And unlike KiwiSaver, you can take your cash out when you need it.

Women need to start investing more.

We know that women have less in their KiwiSaver at almost every age, leading to a significant wealth gap later in life. For women in their 30s, the average KiwiSaver balance is somewhere between $15,000 and $25,000, roughly $10k lower than the average balance for men of the same age. We also know that women own less property in NZ than men, so it isn't that our wealth is all building up in investment properties instead.

However, a study in 2021 found that the percentage of women who were invested in something outside of their retirement funds had increased to two-thirds, up from 44% in 2018, and that Millennial women were more likely to be investing than Gen X or Baby Boomers. There has also been a significant increase in women taking an interest in their finances and taking the plunge into investing since Covid.

There are so many advantages to starting to invest:

The earlier you invest, the more time your money has to benefit from the compounding effects.

A longer time horizon means you can afford to take greater risk in your investments, which means far greater potential growth.

An investment doesn't have to be for retirement, and most people starting at a younger age are investing for more mid-term goals. These might be travel, a family, or even a 'f*ck it' fund to ensure that if everything goes wrong, you can leave a toxic job, relationship, or flatting situation.

Managed Funds can be set up without a lump sum to invest; usually, a starting deposit of $1,000 is standard, after which you can either set up regular contributions (instead of higher KiwiSaver, for example) or deposit lump sums as you have them.

You can also make withdrawals with no fees or penalties, and the money is in your account within as little as 3-5 working days.

The funds are diversified to mitigate the risks, accessible, tax-efficient for high earners, and if set up and looked after by an adviser, there is very little mental load involved, making them perfect for busy professionals.

Lastly, by taking control of your finances, not just budgeting, and paying the mortgage and planning for the future, you will achieve a much better financial outcome than those who feel that they are too young, too strapped for cash, too inexperienced, or too busy to invest. All you need is a little guidance and support, and that's where a trusted adviser comes in.

If you've never thought about how to build wealth, or you've wondered but not known how to start, come and have a chat, and we can help you join the ranks of women outperforming men in their investments and closing that wealth gap!

Elizabeth.

Book in a meeting with Elizabeth here

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What Would She Do?

Elizabeth is the author of the monthly blog What Would She Do? A column for women, by women.

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Disclaimer: Elizabeth Tsikanovski (FSP693611) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Elizabeth’s disclosure statement on our website.

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