Index funds and ETFs (Exchange Traded Funds) are the backbone of modern low-cost investing. Instead of trying to pick winning stocks, you buy the whole market and capture its growth at minimal cost. This approach consistently outperforms most actively managed funds over the long run, after fees.
The simplest NZ investing approach: invest monthly in one or two diversified index funds — for example, InvestNow Foundation Series Global Equity (hedged, very low cost) or Kernel Global 100 (clean interface, 0.39% p.a.). Both are PIE funds so tax is handled automatically at your PIR. Add a NZ equities fund for local dividend exposure if desired.
What Is an Index Fund vs an ETF?
Index fund: A managed fund that tracks a market index (e.g., NZX 50 or S&P 500). You buy units, the manager invests to replicate the index. No NZX listing required — you transact directly with the fund.
ETF (Exchange Traded Fund): Also tracks an index, but is listed on a stock exchange. You buy and sell ETF units like shares, at market price throughout the trading day. In NZ, Smartshares lists ETFs on the NZX.
The practical difference for NZ investors:
- Smartshares ETFs are exchange-traded on NZX — buy via any NZX broker or Sharesies
- InvestNow and Kernel funds are managed funds — buy directly through their platforms, no brokerage cost
Both are low-cost passive vehicles. For regular automated investing without brokerage, managed funds (InvestNow, Kernel) are often preferable. For flexible buying and selling, ETFs via Sharesies work well.
NZX-Listed ETFs — Smartshares Range
Smartshares (NZX subsidiary) is NZ’s largest ETF provider. All Smartshares ETFs are listed on the NZX and can be purchased via any NZX broker or Sharesies.
Key Smartshares ETFs
| ETF (code) | Index tracked | Fee (MER) | Focus |
|---|---|---|---|
| NZ Top 50 (FNZ) | NZX 50 | 0.20% | NZ’s 50 largest listed companies |
| NZ Top 10 (TNZ) | NZX 10 | 0.20% | NZ’s 10 largest companies |
| Australian Top 20 (AUS) | ASX 20 | 0.20% | Australia’s 20 largest companies |
| US 500 (USF) | S&P 500 | 0.34% | 500 largest US companies |
| Total World (TWF) | FTSE All-World | 0.20% | ~4,000 companies globally |
| NZ Property (NPF) | NZX Real Estate | 0.54% | NZ-listed property funds (REITs) |
| Global Bond (NZBF) | Bloomberg Global Bonds | 0.43% | Investment-grade global bonds |
For most NZ investors: TWF (Total World) provides the broadest diversification in a single ETF at very low cost.
How to buy Smartshares ETFs
- Via Sharesies (easiest, with fractional shares)
- Via ASB Securities, Jarden Direct, or other NZX brokers
- Direct from Smartshares (minimum $500 lump sum or $50/month regular plan)
InvestNow — Platform Overview
InvestNow is a NZ investment platform offering access to ~100 managed funds including low-cost index funds, actively managed funds, and term deposits.
Fee structure: No platform fee. You pay only the fund’s Management Expense Ratio (MER). This makes it one of the cheapest ways to access managed funds in NZ.
Key InvestNow Funds
| Fund | MER | Focus |
|---|---|---|
| Foundation Series Global Equity | ~0.03% | Global shares, hedged to NZD, very low cost |
| Foundation Series NZ Equity | ~0.05% | NZ shares |
| Harbour T. Rowe Price Global Equity | ~0.85% | Active global equity |
| Pathfinder Global Responsibility | ~1.10% | Ethical/ESG global |
| AMP Global Fixed Interest | ~0.45% | Global bonds |
| Various Pie Funds | 0.49%–0.99% | Various NZ and global |
Foundation Series funds are managed by Vanguard (underlying) and offered through InvestNow at near-institutional pricing — the Global Equity fund is among the lowest MER options available to retail NZ investors.
Kernel — Simple NZ Index Funds
Kernel is a NZ-founded investment platform focused on simplicity and low fees. Minimum investment $1, no brokerage, all PIE funds.
Kernel Funds
| Fund | Fee | Focus |
|---|---|---|
| Kernel Global 100 | 0.39% | 100 largest global companies |
| Kernel S&P 500 | 0.39% | 500 largest US companies |
| Kernel NZ20 | 0.39% | NZ’s 20 largest companies |
| Kernel Cash Plus | 0.10% | Cash / money market (PIE) |
| Kernel High Growth | 0.39% | Aggressive multi-asset |
| Kernel Balanced | 0.39% | Moderate multi-asset |
Kernel’s Clean interface and auto-invest feature make it popular for beginners. At 0.39% p.a., fees are low but slightly higher than Smartshares or InvestNow Foundation Series.
Simplicity — Low-Cost Ethical Index Funds
Simplicity is a NZ not-for-profit investment company offering KiwiSaver and standalone investment funds. It donates 15% of revenue to charity.
| Fund | Fee | Focus |
|---|---|---|
| Simplicity Growth | 0.31% | 90% shares, global index |
| Simplicity Balanced | 0.31% | 60% shares |
| Simplicity Conservative | 0.31% | 30% shares |
Simplicity applies an ethical screen, excluding tobacco, weapons, and gambling. Fees are among the lowest of any active-manager-free NZ fund.
Fees Matter More Than You Think
The difference between 0.20% and 1.20% in annual fees looks small. Over 30 years it’s enormous:
| Annual fee | $10,000 invested at 7% for 30 years |
|---|---|
| 0.20% | ~$73,000 |
| 0.50% | ~$67,000 |
| 1.00% | ~$58,000 |
| 1.50% | ~$49,000 |
The difference between 0.20% and 1.50% fees — $24,000 out of a $73,000 final balance — is enormous. Fees compound against you in the same way returns compound for you.
Building a Simple NZ Portfolio
Portfolio for beginners (one fund):
- InvestNow Foundation Series Global Equity (hedged) — covers ~3,000 global companies at very low cost
Two-fund portfolio:
- 80% InvestNow Foundation Series Global Equity
- 20% Smartshares NZ Top 50 (FNZ) — adds NZ dividend income and local exposure
Three-fund portfolio:
- 70% global index fund
- 20% NZ equities (NZX 50)
- 10% NZ/global bonds (for stability)
Frequently Asked Questions
What are the best index funds in NZ?
For low fees and simplicity: InvestNow Foundation Series Global Equity (~0.03%), Smartshares Total World ETF (0.20%), Kernel Global 100 (0.39%). For KiwiSaver: Simplicity Growth (0.31%).
Is investing in ETFs safe in NZ?
ETFs are regulated by the Financial Markets Authority (FMA). Fund assets are held separately from the management company — if Smartshares or Kernel went under, your investments would still be intact. The risk is market risk (share prices falling), not provider failure.
What is the NZX 50?
The NZX 50 (New Zealand Stock Exchange 50) is an index of New Zealand’s 50 largest listed companies. It includes Meridian Energy, Fisher & Paykel Healthcare, Auckland Airport, Spark NZ, Infratil, Contact Energy, and others. The Smartshares NZ Top 50 ETF (FNZ) tracks it.
Should I hedge my global investments to NZD?
Hedging means currency risk is neutralised — your global fund returns are reported in NZD regardless of exchange rate movements. InvestNow Foundation Series Global Equity is hedged. Unhedged funds benefit when NZD falls and lose when NZD rises. For long-term investors, hedging reduces volatility without significantly affecting long-run returns.
How do I start investing in Smartshares, Kernel, or InvestNow?
All three platforms allow online account opening in under 15 minutes. You’ll need an IRD number, NZ bank account, and proof of identity (driver licence or passport). Minimum investments: $1 for InvestNow and Kernel; Smartshares direct requires $500 lump sum or $50/month auto-invest.