| Shares are not a very popular investment with New | | | | hot issue, and rightly so. Managers must be |
| Zealand investors. For the good of our economy and | | | | remunerated to perform but also to manage risk. |
| our investment portfolios, shares need to win a few | | | | Communication is also important. Small shareholders |
| more friends. | | | | appreciate frank and candid communication from their |
| Only around 10 percent of New Zealanders own | | | | companies rather than marketing spin. |
| shares compared to over 40 percent of Americans | | | | Education is another issue. Shares are admittedly |
| and Australians. You can point to many reasons for | | | | relatively difficult to research. It is arguably easier to |
| why shares are so much more popular overseas than | | | | assess whether a house is a good investment than it |
| they are in New Zealand. | | | | is to analyse a share. Share brokers and analysts |
| For starters, our alternative investments are so much | | | | have a lot of work to do here. Our reports need to |
| more attractive than they are overseas. Even though | | | | have less jargon and be written in plain English. |
| our government stock rates and term deposit rates | | | | Share brokers should also work more with the likes |
| are currently only barely over 4 percent, they remain | | | | of the NZ Shareholders Association who do sterling |
| the highest in the developed world. Investors | | | | work in helping educate people about investing and |
| overseas are lucky if they earn 0.5 percent on cash | | | | shares. It is also a pity that investment doesn't yet |
| and 2 percent on bonds. | | | | feature prominently in the school curriculum. |
| New Zealanders are happy to stick their savings in | | | | An important part of this education process should |
| fixed income where the returns are okay, than | | | | include advisors and share brokers advising people |
| bother investing in the sharemarket. | | | | not to treat the sharemarket as a racetrack. So |
| The other alternative to shares is of course property. | | | | many investors shun blue chip companies in favour of |
| It has done exceptionally well for New Zealand | | | | minnows or high-risk shares. While these companies |
| investors since the 1960s and remains an important | | | | can make interesting, not to mention entertaining, |
| and excellent investment. | | | | niche holdings, serious investors should focus on the |
| The elephant in the room is of course tax. Property | | | | best companies. |
| investment has tax advantages over shares and | | | | Investors who do best in shares tend to buy high |
| these tax benefits are undoubtedly are a key | | | | quality companies that pay solid dividends. When it |
| attraction for many investors. The Tax Working | | | | comes to shares, cash flow is king. |
| Group that is reviewing our tax regime has highlighted | | | | The two best things about shares are dividends and |
| property as a problem area. | | | | the ability to buy small parcels. Unlike property where |
| New Zealanders have $200 billion of money tied up in | | | | you have to invest a lot of capital in one building, |
| investment property and not a cent of tax is | | | | with shares you are able to invest small amounts in |
| received on this money. In fact it goes the other | | | | many companies. |
| way - the IRD distributes refunds of $120 million on | | | | This diversification is incredibly valuable to protect |
| this massive lump of capital. | | | | against risk and many investors do not use this |
| To give you an idea of size, all of the companies on | | | | diversification advantage enough. Shares also provide |
| the New Zealand sharemarket currently have a | | | | a very good income stream from dividends. Better |
| collective worth of $40 billion. Perhaps half of this | | | | returns tend to come from owning shares that pay |
| value is owned by overseas investors, meaning that | | | | you to own them. |
| the investment property market is about 10 times | | | | So, there is much work to be done before we get |
| the size of the locally owned sharemarket. | | | | Kiwi's enthused about the sharemarket. But it is |
| Shares have an image problem with New Zealanders | | | | worth the fight. If, as a country, we can shift some |
| and a lot of work needs to be done to overcome | | | | capital from property and into businesses, whether |
| these negative perceptions.Small shareholders need | | | | they be listed businesses or unlisted, it will have a |
| to gain more confidence that their boards, in | | | | positive impact on our economy, both in terms of |
| particular the independent directors, are acting to | | | | growth and jobs. |
| protect their interests. Executive remuneration is a | | | | |