3/15/2021 11:00:00 PM

How has the landscape changed for retail investors?


How have low-cost share platforms changed investing? Pie Funds Founder and CEO Mike Taylor explains.

Share investing is easier than ever
It’s never been easier to invest in shares in New Zealand, with a rise in the number of platforms offering a low-cost entry point to investors. People can now invest with as little as $10 or $20.

Investing has been democratised in the last few years. This has been driven by millennials and Gen Z who have grown up in a digital age. With this comes a desire for DIY investing options and decision making, with the ability to do it at their fingertips. 

Sharesies in New Zealand, and Robinhood in the US, have been pioneers in this regard, bringing a whole group of younger people into the investment world. The investment landscape now has far more transparency, and less mystery. This is great news, and I wish these platforms were around when I was getting started in investing 25 years ago. Pie also has some funds available through the Sharesies and InvestNow platforms.

Investing always brings risk
Of course, investing comes with risk, and markets don’t go up in a straight line. People can lose money. But provided investors aren’t using borrowed money (this is not recommended), they shouldn’t get into too much trouble. A few losses are good for investing education too, as you learn more from a loss than a win. It sharpens your mind very quickly to the risk involved. 

The place of fund managers
There is definitely still a place for professional fund managers like Pie, as some people would still prefer to outsource this task, as investing can take time, skill and research, and some prefer to have a relationship manager. I think the rise of these low-cost platforms is good because it’s expanded the total addressable market, and raised awareness about investing. Previously, most people found it intimidating or boring. Seeing consumers learn about money and finance is very positive.

The power of the herd
For professional investors, we can see for the first time the power of the herd, and find out what the herd is thinking much more transparently. All investors can use this to their advantage. We discuss investor behaviour and the popularity of companies regularly in our investment meetings. Investing in exciting companies with a great growth story can be a solid investment strategy. Another good strategy can also be selling companies once they become more popular in the share market than they are in real life. 

Low-cost platforms and GameStop
The GameStop episode earlier this year, where everyday investors used a Reddit thread to drive the GameStop share price higher causing huge losses for hedge funds, highlighted the potential power of the everyday investor. Certainly low-cost platforms orchestrated the game-stop volatility but it’s a free market. We just need to make sure markets have adequate regulation to ensure that all investors are kept fully informed. Which can mean halting trading in a company’s shares for a few hours to a few days to ensure we have continuous disclosure and that investors understand all the risks. An example where it could go wrong is inexperienced investors who bought up large at the end of the GameStop surge, buying at the highest point then being left with shares that were overvalued. Many also invested large amounts of money originally destined for things like their retirement. 

Ultimately, I’m pleased that investing has become fun and interesting. I think it’s great everyone has equal opportunity to buy shares in their favourite companies and use this as a way to grow their wealth. 

Information is current as at 16 March 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.

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