I have half-heartedly invested before, but I always end up cashing out when it goes up a bit, as I really hate debt.
We have recently been thinking about continuing to house-sit while we pay off the mortgage before borrowing again to build. I will use my KiwiSaver, which isn’t much as I’ve been based overseas for 10 years.
Would you recommend I continue with this plan, or should I be putting a bit in ETFs or index funds and then saving the rest? The savings rates are rubbish right now! I have most of my savings in a term deposit at 3.5%.
A: Great idea to house-sit in your situation. Many of us would struggle with not having a home base, but if that’s not an issue for you two, you can certainly save fast if you have little or no accommodation expenses. And I imagine you sometimes live in quite luxurious surroundings.
I think you’re doing the right thing in concentrating on reducing your debt as much as possible. As far as the numbers go, you should compare:
The interest you’re paying on your mortgage. Let’s say it’s 5%.The return you could earn if you saved the money. To make this the better option, you need to be earning more than 5% a year – after all fees and tax.
That’s quite possible in more volatile investments, such as ETFs or index funds. But it’s also quite possible your balance will fall in these investments, especially over just a few years.
If I were you, I would stick with bank term deposits, or possibly a cash fund, for your savings, and keep moving that money into mortgage repayment as fast as possible. Look into an offset or revolving credit mortgage to make good use of the savings in the meantime.
Speaking of volatility, I was alarmed to read that your partner has his money for the property in cryptocurrencies. While you can get big growth there, you can also get big falls. I would strongly recommend he moves to low-volatility investments. Dabble with crypto with, say, 5% of his savings if he must.
Okay … he didn’t ask for my opinion! But I couldn’t resist butting in.
I said above, “as far as the numbers go”. There’s another, psychological consideration in the “invest versus pay down debt” debate. Some people – perhaps including your partner – enjoy the bit of drama that comes with investing in shares, crypto, property, gold, whatever. Others, like you, prefer to be debt-free first.
Fair enough. While debt haters don’t tend to end up hugely wealthy, they often have enough money – and a much less anxious life.
Gold v shares v property
Q: I was interested to read your opinion on the relative benefits of shares and gold. As you point out, shares do give a good return with dividends adding to the allure.
However, in comparing shares, gold and investment property (my personal investment choice), I would rank shares as a third choice, the main reason being the lack of stability compared with the others.
Gold attracts many investors because of its longevity and stability. Property does require regular maintenance and ensuring rents are kept up to date, as well as meeting government regulations such as the Healthy Homes Act.
Shares also need to be watched. They can skyrocket very quickly, but even the best can drop into the doldrums (Fletcher Building, for example). Gold, however, always bounces back and never deteriorates.
Having said that, property is my preferred choice because of the return on investment possible with a 20% deposit and 80% mortgage. The 80% is essentially free money when the rent covers the repayments over 25 years.
A: What you say about stability probably applies if you look at investing in a single share. But I was writing about share funds, which hold many shares.
Out of shares, gold and property, shares are by far the easiest to diversify – simply by using a fund. And diversification significantly increases stability, while not affecting your average returns.
The point in your last paragraph is that, with gearing – borrowing to invest – you benefit from growth on the bank’s money as well as your deposit. It’s possible to do that with gold and shares too, although more difficult.
Gearing usually works well, as long as you sell for more than your purchase price. If you’re forced to sell in a downturn, you can end up with no asset and still a debt to the bank.
And despite what you say about stability, the price of gold can fall considerably. It dropped more than 50% in the early 1980s, and about 30% in 2012 to 2015.
Nor is property immune. Average NZ house prices have fallen more than 15% since early 2022, according to the QV House Price Index. In some areas, the drop has been bigger. And since 1990, the Reserve Bank House Price Index fell in 1991, 1998, 2000, 2009 and 2011 as well as recently. Some of the falls were minor, but not all.
Bury it
Q: Mary, you are too risk-averse. Dig a hole under the house or in the garden for your gold.
No burglar will find it there. House fires get to say 1500C – enough to melt your gold but not vaporise (boil) it. It’ll solidify again, albeit in a different shape!
Tell a trusted family member or two and save your storage costs.
A: I’ll take your word for it on the science!
Your idea could work well – as long as you don’t move house too often. And, if you move when you’re no longer fit enough to dig up the garden, you have someone you can trust to do it for you. And if you’re not in a flood-prone area, where your gold could end up on a beach downstream, or where a cliff might tumble down and bury your gold under tonnes of rubble. And if the trusted relatives don’t unexpectedly die before you – or do the dirty on you. And if you don’t get into a financial crisis and need the money in a hurry, when you’re not near the backyard with a spade handy.
Another thing: Many people seem to like to look at their gold every now and then, whether it’s stored at home or elsewhere.
Still, burying might work for some – and no doubt has.
Unusual fund investments
Q: We invest in a passive managed fund with low fees. Research on sorted.org sent us in the direction of Simplicity. I recently looked at the investments in their growth and high-growth funds.
I was really shocked to see really high holdings in Simplicity Living and Simplicity Mortgages. This is not the diversified exposure to NZ and international investments these products offered when we first invested.
I don’t understand how a passive index fund can have those high holdings in what I am guessing are subsidiary companies of the same organisation. I queried Simplicity on this, but the answer was hard to understand and talked about allocations and aggregates.
What I am wondering is that perhaps this is not (or no longer is) the passive fund we thought it was. Can a fund change from being passive to active without consulting investors?
A: You’re right that some of Simplicity’s higher-risk funds – both in and out of KiwiSaver – include two investments not seen in other providers’ similar funds:
Simplicity Living Ltd, established in 2021, “is a private company that develops and owns long-term rental housing. Investment is through our wholesale Property Fund”, says Simplicity.The Simplicity First Home Mortgage Fund “is a wholesale fund launched in 2020 which invests in mortgage loans to first-home owners. As of September 2025, there are around 450 loans”.
These investments were introduced after Simplicity “identified opportunities in the New Zealand market beyond listed equities and bonds”, it says.
Roughly 5% of the Growth and High Growth Funds are currently invested in long-term rental housing, “via the Property Fund’s private equity shareholding in Simplicity Living”. While the High Growth Funds don’t invest in mortgages, the Growth Funds do. Around 2.2% of each growth fund is currently invested in the First Home Mortgage Fund.
Note, though, that Simplicity has targeted asset allocations for these investments of around 8.6% to 10% of the money in the funds.
“Those percentages represent long-term targets,” says Simplicity. “The actual amount invested will move up or down depending on fund size, available opportunities and market conditions. Holdings may increase over time, but there’s no fixed plan or timeframe to reach those targets.”
It adds, “Note – Simplicity Living Limited is not a subsidiary of Simplicity NZ Limited (the fund manager). It’s 100% owned by the Simplicity Property Fund. The overall investment mix and limits are set out in the SIPO and approved by the supervisor (Public Trust).”
In response to your comments about passive investing, the provider says, “Simplicity’s diversified investment funds are not ‘index’ funds. They have a predominantly passive investment strategy (e.g. their NZ and offshore securities portfolios track our selected market indexes), but as part of diversification, the funds have an allocation to unlisted private assets.”
On your final question, about whether a fund can change from being passive to active without asking investors, Simplicity says, “The short answer is no. While investors aren’t consulted individually, any material change to a fund’s investment strategy requires approval from the scheme’s supervisor, who acts on behalf of investors.
“Once approved, changes are promptly disclosed through updated scheme documents – including the PDSs, SIPOs and OMIs, available at simplicity.kiwi.”
I then asked whether Simplicity considers it did make material changes to its investment strategy when it started investing in Simplicity Living and Simplicity Home.
“No. Both the KiwiSaver and Investment Fund schemes have, from the outset, been permitted to invest in unlisted or private assets as part of diversification.”
What does all this amount to? It seems Simplicity’s unusual investments are above board. And they certainly add diversification to the funds.
While the investments stay at around 5% and 2.2% of funds, they’re not dominating how the funds do. However, if the investments rise to about 10%, that’s a somewhat bigger deal.
Many people will be happy with about one in 10 of their dollars going into much-needed long-term rental property, and mortgages for first-home buyers. But if that’s not you, switch to another low-fee provider that sticks to more conventional investments. It shouldn’t be hard to move.
Oops!
Q: When reading your response to last week’s question titled “More on gold v shares”, I was shocked that under the fair dividend rate regime I am having to pay 5% of the value of my overseas shares to IRD in tax each year.
My understanding was that I was taxed on 5% of the value of my investment, rather than having to pay tax of 5% of the value. It is making my decision to include some overseas investment in my strategy look less ideal than I thought. Can you confirm that this is correct?
A: Apologies. I got it wrong – writing too fast!
I said last week that non-Australasian shares in a PIE fund “are taxed under the FDR (fair dividend rate) regime. You pay 5% of the value of the shares each year.” I should have said, “You pay tax on 5% of the value of the shares each year.”
So, even if you are on the highest PIE tax rate, (or PIR) of 28%, the tax will be 28% of 5% – which comes to 1.4% of the money invested.
There is no tax on dividends or capital gains on non-Australasian shares in PIEs. So, overall, they are not heavily taxed. Don’t give up on them. They give investors much better diversification.
* Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
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