How Does Investing Work In New Zealand?

Jan 25, 2022
By Staff writer

Investment, in a nutshell, is growing your money through calculated risks, so you won't have to work in the future and have more freedom and cushion for life. The ultimate goal of investing is to put your income into good use by purchasing assets that will grow more value — fees, taxes, and inflation rates considered.

While being an investor sounds like a plan, it comes with a lot of risks. One bad investment can cause you to lose your life savings. Instead of simply investing, make calculated risks that increase the chances of great returns of investment (ROI). 

What kind of investor are you?

Your personality may lead you to the type of investor you're going to be. You need to be informed of the risks, different types of funds, and the right avenues for investment, among others. According to the Public Library of Science (PLOS) research Personality traits and investor profile analysis: A behavioral finance studyone of the main factors affecting investors are their personality traits.

"People who are more extrovert tend to be especially involved in short-term investments, whereas long-term investments are preferred by those who score high for openness to experience." The study also noted that, "People who have a high score for the characteristic neuroticism were averse to short-term investments."

Some tend to over-invest or under-invest, depending on their personality and the effort they put in researching different channels of investments.

It’s best to consult a professional to get customised advice on what could work for you. They know the investment market best, so you can trust them with growing your portfolio.

Stable investors

Stable investors aren’t looking to reap over 500% of their investment in a few months. They’re long-term investors that plan to use the returns on their retirement. They’re not looking for an instant ROI as they won’t use them anytime soon. 

At the same time, this type of investor isn’t keen on investing in financial products they’re not familiar with. They’re into more secured investments that promise a steady flow of returns, regardless of whether they’re big or small.

Balanced investors

Balanced investors level the risk with possible investment returns. They invest in aggressive financial products if they can guarantee their promise of high ROI in a short time. However, they’d rather invest in less aggressive funds if they prove to be a better choice.

They’re the perfect definition of investors who take calculated risks. They keep up with the current market trends to make wise investment decisions. Most of the time, they’re not after quick returns but want consistent growth of their investment. 

Aggressive investors

Aggressive investors are after high ROI in a short time. Instead of investing for retirement, they invest for profit. Unlike other investors that want steady growth, they’d rather choose a financial product with quick growth.

While all investors want high profit, this may not be sustainable in the long run due to its high risk. Aggressive investors know this, so they only invest short term. This may work for new investors or anyone that doesn’t need instant returns. 

Financial advisors help you find out what type of investor you are, and the type of financial products you should invest in.

What financial products are available for investment?

Fortunately, there are a wide variety of investment opportunities presented to every Kiwi. Whether they like steady growth or fast returns, there’s a financial product to invest in. Some of the most common products include:


Buying shares is like buying a percentage of the company. If the company makes money, the more profit (also called a dividend) you get in return. While they may experience a fall in value once in a while, it’s a stable investment, perfect for long-term investors.


Bonds are debts issued by government councils and private companies. As an investor, you’re lent money for a certain number of years. You are to pay on top of a certain interest rate, also called a coupon. The risks depend on who the lender is and how you’re managing the investment, making it an accessible choice for any kind of investor.

Term deposits

Essentially, investing in term deposits is lending your money to the bank. This is to be paid with a higher interest rate on a fixed period, anywhere from 6-12 months. This is an excellent way to earn big returns in just a short period. However, you may not be able to withdraw your money while on a term deposit. Some banks allow you to withdraw, but the interest rate is lower.

Real estate properties

Real estate properties are an excellent investment because their value always goes up. This sure increase in value over time is called capital gain. Although to be an investment, it has to generate income. Renting your property is one way to generate income. You may also have to be aware of your mortgage and interest. Its complex nature is ideal for experienced investors.

Savings account

A savings account is a great investment option for beginners. Just like a term deposit, you lend your money to the bank for an indefinite time until you withdraw your savings. This is a low-risk investment with low-interest rates, meaning the profit is going to be low well. This isn’t an optimal choice for long-term investors as you earn very little even if you invest for a long time. Considering inflation, you might actually be losing more money in the long run if you just let your money sit in the bank.

KiwiSaver and other managed funds

KiwiSaver and other managed funds purchase financial products such as shares, real estate properties, term deposits, commodities, cryptocurrencies, among others using your money. Coming from the name itself, someone manages your funds and invests them in your stead. This is an excellent choice for every investor, even for experienced investors.

On top of these, there are plenty of other available financial products n New Zealand. To know how which product to invest in, talk to a finance professional.


What should you take note of when investing?

There’s no one-size-fits-all method to invest your money. It all depends on how much budget you have, how much you’re willing to invest, and where you'll use your ROI, among other things.

Nonetheless, it’s wise to take note of these points when investing:

Have a clear goal in mind

What are you investing for? Why are you investing in the first place? Do you have a goal like saving up to buy a car or a house? Perhaps, you’re preparing for your retirement? Whatever it is, always set a goal.

To set a goal, you can either set it through:

  • Duration - You can either invest short-term (1-3 years), medium-term (4-9 years), or long-term (10 years+). Of course, each investment duration corresponds to a different financial product to invest in.
  • ROI - On the other hand, you can set your goal as your ROI. Once you hit your target ROI, you can cease your investment. This is a great option for short-term investors that may tend to prolong their investment.

Balance the risk and return

Investment, in its nature, offers greater returns when the risks are higher. However, this also means the possibility of failing is also higher. At the same time, some low-risk investments may offer very little to almost no returns at all. 

No matter what type of investor you are, it’s always wise to balance the risk and return. After all, you don’t want it to be too risky, being more of a gamble than an investment. At the same time, you want to earn considerable returns on your investments.

Diversify your portfolio

Diversify your investment portfolio as much as you can. As they say, don’t put all your eggs in one basket. Other investments do well, while others do great. This is simply the nature of investing. This makes it a great way to minimise the risk and guarantee returns. 

Diversifying may be a hassle as you need to manage everything at the same time,  but it’s an essential part of investing if you want to maximise your returns. If you find it difficult to manage all your investments, you can always consult a fund manager or a financial advisor.

Use the right tools

To stay up-to-date with the current trends and get the best interest rates, use the right tools. There are plenty of different share investment apps that you can access through your smartphone. To find the right investment tools for your needs, you can use our free comparison tool, right here at glimp.

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