CMC Markets is a trading platform that allows retail investors exposure to more sophisticated \u2013 and some would say more volatile \u2013 financial products.<\/p>\n
Investors can trade currency, commodities, or even \u201cshort\u201d stocks via CFD (contract for difference) products.<\/p>\n
\u201cI\u2019ve got a higher risk tolerance than probably most people. But in saying that, I\u2019ve had the same job for 21 years,\u201d he jokes.<\/p>\n
But for those who like a bit of investment risk, CMC Markets is a good place to be.<\/p>\n
Smith has watched the British-based online trading platform expand in New Zealand as the levels of local investor sophistication have grown.<\/p>\n
It isn\u2019t the place for everyone, he concedes.<\/p>\n
Many investors are content with paying down the mortgage and contributing to KiwiSaver.<\/p>\n
\u201cWe are a niche, niche business,\u201d Smith says. \u201cWe have strong suitability rules around who we onboard and our [CFD trading business] is a higher risk proposition.\u201d<\/p>\n
CMC does also offer a standard investing platform, more akin to the likes of Sharesies.<\/p>\n
\u201cWhen we first opened the office here, foreign exchange was our number one product. Most people we talked to wanted to buy and sell New Zealand dollar or the Australian dollar. Now it\u2019s morphed to more, you know, global markets,\u201d he says.<\/p>\n
In fact, in the past six months, gold has become the most popular invested and traded product.<\/p>\n
Oil trading has also picked up, with the outbreak of the Iran conflict this year.<\/p>\n
\u201cMost of our customers want volatility; they look for volatility in different asset classes,\u201d he says.<\/p>\n
\u201cIt\u2019s a huge opportunity. It\u2019s obviously super scary to some conservative investors. Yeah. Um, you know, if, if you\u2019re used to investing in term deposits and you\u2019re happy with, you know, 3 to 4% returns a year, this is not the place for you.<\/p>\n
\u201cBut the S&P [500] has averaged 11% for the last 10 years. It\u2019s far outpaced traditional cash investments.\u201d<\/p>\n
CMC doesn\u2019t give investing advice, he says.<\/p>\n
\u201cIt\u2019s not something you would put your entire portfolio into, but a lot of our clients speculate on the markets; a lot of them hedge. There\u2019s very few options to hedge yourself in this current market in New Zealand.<\/p>\n
\u201cIf you believe the share market might have a downturn, you can benefit and speculate on that movement.\u201d<\/p>\n
Smith says his first exposure to stock market investing was when he was in his mid-teens.<\/p>\n
\u201cI was hooked from then on. My family weren\u2019t huge investors. I certainly didn\u2019t grow up listening to or hearing about investing.<\/p>\n
\u201cInvesting was my way out … trying to do something for myself and grow my own wealth.\u201d<\/p>\n
He says he read every investing book he could get his hands on, such as Rich Dad Poor Dad and the writings of Warren Buffett.<\/p>\n
\u201cIt was anything to get ahead, and property was out of reach. For the average young investor, you can\u2019t go and buy a property. You know, you need that deposit, and investing was the way to create that deposit.\u201d<\/p>\n
Smith says he remembers being inspired by Graeme Hart taking over Aussie food giant Burns Philp in the late 1990s.<\/p>\n
\u201cIt was one of the early stocks I bought, and then it was taken over shortly after,\u201d he says.<\/p>\n
\u201cI got that bug of investing.\u201d<\/p>\n
In those days, just buying shares wasn\u2019t easy \u2013 especially on international markets.<\/p>\n
The Australian stock market was \u201csuper exciting\u201d but very hard to get access to, he recalls.<\/p>\n
You had to find a broker, and it was expensive to invest.<\/p>\n
\u201cI think it was a $500 minimum parcel of shares,\u201d he says.<\/p>\n
\u201cToday we have fractional shares. You could buy $10 of shares.\u201d<\/p>\n
Fractional investing gives far more investors access to the markets.<\/p>\n
\u201cYou could buy a portion of Tesla shares or a portion of the S&P 500.\u201d<\/p>\n
Smith also recalls that financial literacy, as something taught in schools, was very weak.<\/p>\n
That\u2019s something he hopes has improved but also an area where more could be done.<\/p>\n
Later he had a share club at university.<\/p>\n
\u201cSix friends getting together, picking stocks, doing research, sharing ideas,\u201d he recalls.<\/p>\n
\u201cAll of that\u2019s done online these days. But back then it was that enjoyment of finding the next Apple. We all knew that this was kind of an industry we would morph into working in.\u201d<\/p>\n
When it comes to investing, Smith says self-awareness is crucial.<\/p>\n
\u201cI think understanding yourself is the most important of all,\u201d he says.<\/p>\n
\u201cHow do you react if something happens, such as a 10% fall in something? The more you understand your own emotions and behaviour, it will help drive what suits your investing outlook.\u201d<\/p>\n
Smith says he\u2019s worked with people in the finance industry who will only buy bonds or term deposit cash.<\/p>\n
\u201cFor me, that\u2019s total madness. But for them, it is what they\u2019re comfortable with. Everyone\u2019s different.\u201d<\/p>\n
He made mistakes, he says. But you learn.<\/p>\n
\u201cPeople are hard on themselves. Why did I buy that leaky property? Or why did I invest in that stock that was already up 100% and then it dropped? You often veer off track.\u201d<\/p>\n
That\u2019s why financial advisers are still very important to the industry, he says.<\/p>\n
\u201cThey keep investors on their path of goals, what they want to achieve.\u201d<\/p>\n
Setting goals is important, Smith says.<\/p>\n
\u201cWhether you\u2019re wanting to buy your next property, or you want to go on holiday, or you want to retire at a certain age.<\/p>\n
\u201cYou need something to work towards.\u201d<\/p>\n
Smith says he is a huge advocate for KiwiSaver.<\/p>\n
\u201cAnd I\u2019m a huge advocate for making KiwiSaver more aligned with Australia,\u201d he says.<\/p>\n
\u201cWe have so many people moving to Australia.<\/p>\n
\u201cWith their [savings rate] being 12% and wages being higher (despite there being enormous amounts of taxes in Australia versus New Zealand) … the more we can align KiwiSaver with the Australian level, the less we\u2019ll be having a conversation about it [being] better there and worse here.\u201d<\/p>\n
So what is the best financial advice Smith has received?<\/p>\n
\u201cThe best time to start investing is today,\u201d he says. \u201cIf not yesterday.<\/p>\n
\u201cDo not wait for the crash in the markets, because you\u2019ll be too scared to, like, invest then.<\/p>\n
\u201cI think there\u2019s a stat: if you invested $10,000 over the last 20 years, but you missed the best 30 days, you would be down to $5000. So staying invested is the most important thing of all … throughout all market cycles.\u201d<\/p>\n
History does tend to repeat, Smith says.<\/p>\n
He doesn\u2019t let ugly geopolitical news worry him.<\/p>\n
\u201cThere\u2019s been conflict every year since I started this business,\u201d he says.<\/p>\n
\u201cI can\u2019t name a year there hasn\u2019t been conflict to talk about, and the biggest days in the stock market are generally after the worst days; that\u2019s why timing the market is quite challenging.\u201d<\/p>\n
Nor is he convinced by those who think we have an AI bubble to rival the 2000 tech wreck.<\/p>\n
\u201cI don\u2019t worry too much about it. I think in terms of the AI companies, I think the genie\u2019s out of the bottle. That\u2019s not turning around.<\/p>\n
\u201cIf you turn off ChatGPT or Claude or any of them tomorrow, there\u2019d be a lot of uproar because it\u2019s become part of many, many people\u2019s daily life.<\/p>\n
\u201cI think that train\u2019s left the station, and it\u2019s going to gonna continue to gather momentum.\u201d<\/p>\n
We\u2019re continuing to see enormous capex investment from the big \u201cMag Seven\u201d companies.<\/p>\n
Smith finds that comforting rather than concerning.<\/p>\n
\u201cThey\u2019re not silly, you know? They don\u2019t decide to invest $100 billion plus without knowing that the future demand is gonna be there.\u201d<\/p>\n
For investors, these calls again come back to personal risk appetite, Smith says.<\/p>\n
\u201cIt\u2019s up to you how risky you want to make your investment strategy,\u201d he says.<\/p>\n
\u201cIf you put in no work, of course, it\u2019s gonna be high risk. If you go and try and become a top golfer and put no effort in, it\u2019s going to be pretty hard work for you. And it\u2019s the same for investing.\u201d<\/p>\n
Some will argue that the safest way to invest is to do so passively, he acknowledges.<\/p>\n
\u201cThey always say passive investing will beat active investing in most studies that have been done,\u201d he says.<\/p>\n
\u201cYep, but the challenge of beating the index is what drives myself, and what drives lots of our customers.<\/p>\n
\u201cThe challenge that you could beat the market with your own DIY investing and research, I think that\u2019s really exciting.\u201d<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n
Listen to the full episode<\/a> for the complete conversation.<\/p>\n