InvestNow Review - making sense of the DIY investment platform

Updated September 2018

Summary of InvestNow

Wellington-based platform offers investment into 80+ managed funds at a cost of $0/year to an investor.
Annual fund fees (including performance fees) range from 0% to 2.72%, with many index funds offered.
Investments from $250 can be made into any fund, many funds run by big names such as AMP, Fisher Funds etc.
Children can join InvestNow, one of the few fund platforms to offer this.
InvestNow ultimately undercuts Sharesies and SmartShares with its $0 platform fee, as well as offering a choice of funds unrivalled in New Zealand.

InvestNow's Background
InvestNow launched in 2017 with the intention of offering Kiwis more options and greater transparency when it came to investing in managed funds. Since launching, the DIY-styled platform has grown to offer 80+ different funds operated by 15 fund managers, investing locally and globally. InvestNow is unique in promising “no transaction or administration fees”, a first for its kind in New Zealand.

Our Review
In this guide, we outline what InvestNow is, what funds they offer to the Kiwi investor and how InvestNow differs from other platforms. We also look at the fees involved in investing via InvestNow.

Please note: moneyhub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of InvestNow as an investment platform.

First Steps - What is an "index fund"?

An index fund (or "ETF") is a type of investment that is established to invest in or track the components of a market index, such as the New Zealand NZX50 (our largest 50 companies) or the Standard & Poor's 500 Index (S&P 500).
An index fund provides diversity in risk, as your investment is spread over many companies within the index, proportioned by the size of each company's market value.
The index fund benefits from low operating expenses and management fees because the fund must invest in the companies within the index and therefore doesn't need fund managers to make judgments or research in order to make the investments.
An index fund operates no matter the state of the markets, so as markets overall go up your investment is worth more, and vice versa.
An index fund is different to many other managed funds, which have investment managers working to predict market movements and make investments on your behalf to add value to your portfolio.

The Specs of InvestNow

Funds on offer: Currently, InvestNow offers 83 funds from 15 different fund managers. The funds include passive, cash-based investments (bank deposits, bonds and government debt), index funds (investing in specific sharemarkets, such as New Zealand’s NZX50 and the American S&P 500. There are also a number of actively managed funds with specific industries such as property, mining and emerging markets.
Diversity: The number of funds on offer gives an individual investor a wide choice when it comes to deciding about investing. At the same time, the choice could be overwhelming for a newbie investor.

The fees are as followed:

Annual fees for using InvestNow as a platform: $0, with no purchasing or selling fees either
Minimum Initial Investment: $250 for all funds, or $50 with regularly scheduled contributions
Fund fees: All but one of these funds charges a management fee, which ranges from 0% (AMP Capital Cash Advantage Fund) to 2.72% (Fisher Funds Property & Infrastructure Fund, which includes a 1.10% performance fee).
Performance fees: Some funds charge them, others don't. It should not be assumed that a fund will charge the same performance fee every year, as the future performance of the fund cannot be predicted.

Investment Products include:

Cash (i.e. bank deposits in New Zealand banks)
New Zealand Fixed Income (i.e. investments in government bonds or company debt)
New Zealand Shares (i.e. shares in Spark, Fletcher Building and Air New Zealand)
Australian Shares
International Fixed Income bonds and deposits
International Shares

If I buy a fund with InvestNow, am I buying a share on the sharemarket?
In most cases, the answer to this is yes. The majority of InvestNow funds invest in shares. Usually the investments are diversified so you are protected if and when one or two investments don’t work out.

Risk

The 80+ funds each offer a unique investment strategy. Some are low risk, some are medium risk and some are high risk. The returns/profit you make don’t necessarily depend on the risk you take.
Not all funds are hedged to the New Zealand dollar. This means that if our dollar rises against any overseas currency and your fund is not hedged, the value of your investment reduces in NZD. You’ll need to check with the funds with regards to what (if any) hedging they have in place.

Who is InvestNow Suited to?

Best For: Investors looking for a value for money investment platform that doesn't carve off fees who also want their money with established and respected fund managers. The low minimum investment of $50-$250 makes the platform widely accessible, and the zero platform fees commitment means what you contribute is what you invest.
Not suitable for: Certain investors looking to make individual investments in specific companies or industries, or investors looking for short-term buying and selling. Index funds don’t move that much in the short term. With most funds offered by InvestNow, you buy anticipating local and/or global markets to rise over time while being diversified enough to avoid losing money if one or two shares flounder.
Most suitable investor: Anyone looking to improve their understanding of capital market investing and can make regular contributions to build their investment over time.

Standout Features:

No administration and platform fees – this is the main draw to InvestNow. Other investment platforms charge establishment fees and/or annual fees; InvestNow does not. If you’re likely to invest in a number of funds, this could offer significant upfront and ongoing savings.
Access to the Vanguard International Shares Select Exclusions Index Fund, a fund tracking companies but excluding investments in tobacco, controversial weapons and nuclear weapons, is available with an annual fee of 0.20%. This fund usually has a minimum investment of $10,000 if purchased outside of InvestNow.
You can access funds which usually require a high initial investment. For example, Fisher Fund’s International Growth fund requires a minimum $2,000 initial investment. Mint Asset Management’s Australia New Zealand Real Estate Investment Trust has a $5,000 minimum investment. With InvestNow, you can get exposure to both of these funds for $250 which makes funds like these increasingly available to smaller investors.
Flexible ongoing investing from $50 is perfect for newbie investors looking to get into sharemarket but not pay brokerage fees on individual trades. As the funds invest in shares, there is direct exposure to local and global markets.
The 80+ funds offer a lot of diversity, but managed fees range so it’s important to be comfortable with what you’re investing in and making sure it represents value for money.
The diverse number of funds means you can focus on particular industry sectors in specific countries, such as Australian property, New Zealand property and global emerging markets.

But be aware:

Fund performance statistics are not easily found, meaning you don’t have a clear way to compare funds on the InvestNow.co.nz website. We found a November 2017 report but the data wasn’t presented helpfully or with any explanation as to fund performances.
To learn more about a fund, you’ll need to download its investor prospectus – these range in pages from 10-50 pages each. We didn’t find this particularly user-friendly.
Big institutional investment brands like AMP, ANZ and Fisher Funds make up around 50% of all funds on offer
Some funds require investors to complete tax returns for overseas earnings.
Certain funds not marked as “sustainable” may make investments in companies trading in weapons, tobacco, nuclear and other “unethical” business. The US 500 fund is an example of that.
As is the case with any index fund or equities investment, markets go up and down. The Dotcom bubble in the early 2000s sank global indexes, as did the 2008 Global Financial Crisis. All indexes are now at record highs, but this is no guarantee of future earnings.

InvestNow - What You Need to Know

Claims made by InvestNow

“When selecting fund providers, we look for ones recognised in the industry as “award-winning” and with extensive global or NZ experience. This ensures you can invest online with confidence”.

Is it True?

It's a subjective claim, but overall the funds available offer diversity to a new investor.
InvestNow offers SmartShares, Vanguard, Fisher Funds and 10+ other fund managers. This diversity is superior to platforms like Simplicity, Sharesies or Smartshares, which have a limited number of funds in comparison.
It’s also worthwhile noting that InvestNow’s fund managers pay InvestNow to be listed, and make money every time someone picks their fund to invest in. This is a form of commission which the individual investor pays for in one way or another.

“No Fees, No Middle Man. We firmly believe in removing all barriers to self-managing your investments, so InvestNow won’t be charging you any transaction or admin fees.”

Is it True?

It’s true when it comes to using the platform - a significant advantage over competing platforms such as Simplicity and Sharesies, both of which charge annual fees to use their platforms. However, whatever fund(s) you invest in will still charge you, but these will be charged by the fund manager and not InvestNow.

“We provide you ongoing market commentary and performance reports enabling you to manage your investments”.

Is it True?

Kind of. The platform does provide performance statistics (daily gain/loss etc.).
With regards to “ongoing market commentary”, we reviewed InvestNow’s blog, Facebook page and Twitter and didn’t find any market analytics.
With 80+ funds investing globally, it’s a stretch for InvestNow to provide useful market commentary given the diversity of the underlying investments.

The Competition – InvestNow vs Sharesies, SmartShares, Simplicity and Superlife

Hands down, InvestNow offers a lot more investment opportunities than Sharesies (11 funds), Simplicity (3 funds) or SmartShares (33 funds).
There is some fund crossover – all the major index funds are offered by InvestNow.
Minimum contributions: To start a portfolio with InvestNow you'll need $250 (or $50 if you make regular contributions, i.e. weekly, monthly or up to six-monthly) - Sharesies is $5, Simplicity is $10,000 and SmartShares is $250.
Annual fees: Unlike the other platforms, there is no annual fee or per fund establishment fee. All the other platforms charge, making InvestNow the cheapest method of fund investing across all four platforms.

What Others Are Saying

Susan Edmonds reported in 2017 in BusinessDay that investors using InvestNow “can start with a smaller deposit than is usually required, and no administration or transaction fees, with a number of fund managers on the platform, including AMP Capital, ANZ Investments, Harbour, Salt and Vanguard”. The article also states that “some of these fund managers would normally require minimum investments of $10,000. Via InvestNow, investors can start with $250”.

Tamsyn Parker, the Herald’s money editor, reported in 2017 that InvestNow “will offer mum and dad investors the chance to access a range of investment funds which normally require hundreds of thousands of dollars as a minimum direct entry”. The article then quotes InvestNow founder Anthony Edmonds (formerly the head of sales and marketing for AMP Capital) as saying that the platform “would allow small investors entry into funds normally reserved for wholesale investors with Harbour having a minimum of $250,000 and Vanguard $500,000 for direct investment”.

In 2017, Stuff.co.nz published an opinion piece around young people and money, claiming that “online platforms like InvestNow, RaboDirect, Smartshares, and Sharesies have greatly shrunk the role and cost of middlemen in the buying process for ETFs and are some of the lowest-fee options for investors” and that with InvestNow, the most popular funds tend to be "brand-driven" - SmartShares funds and the Vanguard fund being the most popular.

Finally, InvestNow published a press release in June 2017 claiming that in the 3 months since their public launch, “InvestNow (has) rocketed to having more than $50 million being directly managed by clients using the new online investment service”.

The Bottom Line

InvestNow is an excellent initiative for new and/or small investors looking for affordable exposure to local and global sharemarkets without paying platform fees. With 80+ funds available, there is something for everyone’s risk profile.
We like the Vanguard fund with its low 0.20% annual fee and exclusions of companies that are not socially beneficial (i.e. involved in tobacco, weapons and nuclear).
The underlying investment funds offer diversity in the sharemarket (both in New Zealand and overseas) without significant risk.
With regards to user experience, InvestNow offers secure passcode protection to make log in secure. From there, it’s easy to navigate, invest, sell investments and read performance reports.
InvestNow may not appeal to everyone - if you’re fresh into investing, the vast number of funds may be overwhelming. To remedy this, we’d like to see InvestNow classify its investments into risk categories (low, medium, high etc) to better explain them to inexperienced investors. If you are an active or aggressive saver/investor and want a fund manager to continuously pick shares or other securities for short/medium term investment, there are plenty of funds offered that do this and you can access them from $50-$250, often a big discount from the minimum buy-in if you went to the fund manager directly.

Limitations
InvestNow’s funds, like most managed funds, are not for the short term. While funds are free to buy and sell, to get the most out of index funds you’re realistically looking at a 5-10 year investment plan to maximize the return.

If you’re looking for funds investing in specific industries, such as oil and gas, agriculture or mining, the funds offered by InvestNow may not meet your needs. Most funds focus on diversified equity investments in Australasia, the USA and Europe. As such, you would need to find a specialist fund for such an investment.

10 Things to Know About InvestNow

InvestNow isn’t a KiwiSaver scheme

If you’re looking for a KiwiSaver scheme, InvestNow is not it. But if you are interested in indexed funds for your KiwiSaver, InvestNow’s SmartShares funds are also used by SuperLife, a KiwiSaver provider.

“Free Fees” does not extend to fund management and performance fees

Each fund manager will charge a management fee (the average across all InvestNow funds is 1.15% per year) which is taken out of your investment. This means if the value of the shares your fund invests in go up 5% in one year, your return on investment would be 4% if the fund had a 1% management fee. The “Free Fees” marketing promoted by InvestNow refers to their own platform fees, as well as free buying and selling of funds.

Some funds offered are managed by the owners of InvestNow

InvestNow is owned by Implemented Investment Solutions (IIS), a Wellington-based company which managers funds under the names “Russell Investments” and “Hunter Global”. These funds charge different fees, but InvestNow offers plenty of alternatives and doesn’t actively encourage in their related company funds.

InvestNow offers a wide range of fund managers and investment diversification opportunities

There is a huge range of funds offered offering different levels of risk and fees. For index funds, any investment means you’re putting money into a number of companies, so if one doesn’t perform as expected the strength of other companies will balance out the bad eggs. For example, the NZ Top 50 fund invests in the 50 largest New Zealand listed companies, so you are well diversified. Other funds invest in 500 or more companies, meaning you are well diversified.

You can make regular investments or one-off investments from $50)

If you’d like to make regular contributions to savings outside of a KiwiSaver fund, InvestNow has relatively low entry points. Each fund needs to have a minimum of $250 to be established, or a commitment to invest $50 on a regular basis. With no per-fund establish fee or platform fee, we believe that InvestNow is very accessible and an affordable way to build up your chosen fund(s) at no marginal cost.

The performance of an InvestNow portfolio is transparent

Logging in to InvestNow displays your portfolio value for every fund invested in, updated daily. You’ll be able to see details like increases or decreases in value from the previous day and monthly returns. It’s made very user-friendly for beginner investors.

Dividends your fund(s) receive can be reinvested, meaning more cash is invested on your behalf

Many of the shares your fund invests in will pay dividends. These cash payments represent the profits from companies returning it to the shareholders, i.e. you. When a company declares a dividend, your fund will receive money and buy more shares in the ETF with the dividend received. For example, if you receive a $100 dividend and the ETF is currently priced at $2.00, your ETF will buy 50 more fund units on your behalf. You’ll need to check with the specific fund to see their policy, as some also offer the alternative of dividends being paid out in cash. Reinvesting dividends is the best way to increase the value of your investment in the long term.

Signing up isn't complicated, but you’ll need to wait a couple of days before making your first investment

Making your initial investment with InvestNow is very straightforward, even for the most inexperienced investor. You’ll need to set up login access first, using an email and creating a password. After this, you’ll need to complete your registration by entering in personal details (tax, bank account numbers, financial disclosures and dividend preferences). You can then fund your account and once the money has cleared (usually occurring every weekday morning), you’ll be able to start investing.

Children can join InvestNow too

If you want to start an investment for your children, InvestNow offers investments in any of their funds. You’ll only need a proof of ID – proof of address can be in the parent or guardian’s name.

Funds that don’t mention "social responsibility" are unlikely to be socially responsible

InvestNow promotes a couple of funds that are socially responsible – the Vanguard International Shares Select Exclusions Index Fund (0.20% annual fee) and the Pathfinder Global Water Fund (1.49% annual fee). Beyond these, it’s uncertain which funds are “socially responsible” and therefore their status cannot be implied or assumed.

Our Conclusion

InvestNow is the first investment platform to smash administration fees to $0 while breaking down the barriers to investing with affordable $50-$250 thresholds. Funds previously unobtainable to most individuals are now able to be invested in.
The 80+ funds offer diversity and are backed by an online platform that delivers up to date portfolio data at no cost to the investor. There are a number of index funds offered, so the risk of picking the wrong companies is reduced as each fund invests in a number of shares.
InvestNow perhaps offers too many funds, which may confuse or intimidate newbie investors. However, for most people looking to make one-off or ongoing investments, the platform is a perfect choice to launch from.