7 reasons to invest in Smart ETFs
Find out more about the benefits of Smart Exchange Traded Funds (ETFs) and why they have become a popular investment choice for many people.
What is an ETF?
An Exchange Traded Fund (ETF) is a type of investment fund that pools money from investors to buy a collection of assets, such as stocks or bonds. The Smart ETFs are traded on the NZX, New Zealand’s stock exchange, allowing investors to buy and sell shares throughout the day, much like individual stocks.
Unlike actively managed funds, where a fund manager aims to outperform a specific benchmark, most ETFs are designed to track the performance of a particular market index. For example, the Smart S&P/NZX 50 ETF (NZG) aims to track the S&P/NZX 50 Index, which is comprised of 50 of the largest NZX-listed companies.
ETFs offer investors a cost-effective, diversified and transparent way to gain exposure to a broad range of assets, markets and sectors, while also simplifying the process.
7 reasons to invest in Smart ETFs
1. Diversification
A key benefit of Smart ETFs is the diversification they offer, both within the individual unit and as a component of a broader portfolio. For instance, purchasing the Smart US 500 ETF (USF) gives you exposure to 500 of the largest listed companies in the United States, including Apple, Microsoft, Eli Lilly, Johnson & Johnson, Visa, and many more.
Most investors agree that diversification is a cornerstone of prudent, long-term investing. It helps achieve the primary goal of maximizing returns while minimising risk. By spreading investments across various assets (such as bonds and shares), markets, and sectors, investors can reduce their exposure to risk. If one investment performs poorly, its negative impact may be offset by stronger performance in others and vice versa.
While diversification doesn’t eliminate risk entirely, the structure of ETFs may help to improve the risk-return balance, potentially enhancing your portfolio’s overall risk-adjusted performance.
2. Flexibility
We offer a broad selection of Smart ETFs, giving investors access to a variety of asset classes and markets. The flexibility of this wide range, combined with the inherent diversification in each fund, makes Smart ETFs ideal as portfolio building blocks.
Investors can combine Smart ETFs to build a diversified portfolio tailored to their specific goals and risk tolerance.
3. Accessible
The Smart ETFs are traded on the New Zealand Exchange (NZX), allowing investors to buy and sell units on the market, similar to shares.
You can buy Smart ETFs through any NZX Participant such as a broker or a financial adviser, or via an online investment platform such as Sharesies or InvestNow.
You can also buy ETFs directly from Smart from $500 per fund for new investors, and for as little as $50 from existing investors per month. This service is designed for those looking to save regularly into Smart ETFs and is available for purchases only. To sell your ETF that you purchased from Smart, you need to contact your broker or financial adviser.
4. Transparent
Understanding what you own helps you make informed investment decisions. Smart ETFs have clear and transparent investment objectives. Information about holdings, performance, and costs is also published regularly.
Investors can easily access the current price of their Smart ETF on the share market, along with updates and announcements, including details on distributions.
5. Listed Portfolio Investment Entity (PIEs) for tax purposes
Each Smart ETF is a listed Portfolio Investment Entity (PIE) and is taxed at a rate of 28%. The PIE tax rules can simplify tax compliance for investors by allowing PIE-compliant funds to manage tax obligations at the fund level.
Dividends or distributions received from a Smart ETF will not generally need to be included in your income tax return.
However, if you are a New Zealand tax resident currently paying tax at a rate less than 28%, you may benefit from including the fully imputed portion of distributions from a Smart ETF, including any bonus issues, in your tax return. Doing so could allow you to use the excess tax paid by the Smart ETF to reduce the tax payable on other income you’ve earned throughout the year.
6. Lower fees
Smart ETFs generally have lower fees compared to many other funds because they simply track indices rather than being actively managed. The annual management fees for our Smart ETFs range from just 0.20% to 0.75%.
7. Convenience
Investing in Smart ETFs allows you to build a diversified portfolio with global exposure in New Zealand dollars while streamlining the investment process. You won’t need to worry about managing the complexity of individual holdings, foreign currencies, or tax reporting on global shares.
Distributions are paid in New Zealand dollars and automatically reinvested for you, unless you choose to receive them in cash. Smart ETFs simplify investing, making it easier for you to start investing and manage your portfolio throughout your investment journey.
7 reasons to invest in Smart ETFs
1. Diversification
Each Smart ETF holds a range of underlying investments.
2. Flexibility
The wide range of Smart ETFs gives investors the flexibility to combine Smart ETFs to build a diversified portfolio tailored to their specific goals and risk tolerance.
3. Accessible
The Smart ETFs are traded on the New Zealand Exchange (NZX), allowing investors to buy and sell units on the market. We offer the choice of three investment channels to suit your needs.
4. Transparent
Smart ETFs have clear investment objectives. Information about each fund’s performance and portfolio is published regularly. Investors can easily see the price of their Smart ETF on the NZX, along with updates and announcements.
5. Listed Portfolio Investment Entity (PIEs) for tax purposes
The PIE tax rules simplify tax compliance for investors by allowing PIE-compliant funds to manage tax obligations at the fund level. The Smart ETFs are taxed at a rate of 28%.
6. Lower fees
The annual management fees for our Smart ETFs range from just 0.20% to 0.75%.
7. Convenience
Smart ETFs simplify investing, making it easier for you to start investing and manage your portfolio throughout your investment journey.
Risks
All investments involve risk. Purchasing Smart ETFs does not guarantee a profit and the value of your investments can go down as well as up. The unit price of each Smart ETF can go up and down and units can trade at a discount or a premium, which means the purchase price of a unit can differ from the value of the underlying fund assets. A more comprehensive description of the risks in this type of investment can be found in the relevant Product Disclosure Statement.
How to invest in Smart ETFs Our range of Smart ETFs
This information is issued by Smartshares Limited (Smart). The value of investments can go down as well as up and investors may not get back the full amount invested. Returns are not guaranteed. This information is intended to provide a general guide and is based upon, and derived from sources Smart considers reliable. Neither Smart or its respective directors and employees accept any liability for any errors, omissions, negligent misstatements, or for the results of any actions taken, or not taken in reliance on this information. This information is not a substitute for professional advice. In preparing this information, Smart did not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before making any investment decision, Smart recommends professional assistance from a licensed Financial Advice Provider is sought.