How to Invest in the Stock Market in New Zealand?

What is stock market investing?

Investing in the stock market involves buying financial securities – mainly stocks or bonds – with the aim of making a profit in the medium or long term. These securities are traded on financial markets, where buyers and sellers meet.

Investing in the stock market allows you to become a shareholder in a company (via shares) or a creditor (via bonds). In return, the investor can receive income (dividends or interest) and hope for a capital gain when reselling the securities. This type of investment is therefore a way to grow your savings by taking advantage of the development of businesses and the economy.

Unlike speculation, which is based on short-term operations that are often riskier, investing in the stock market is a long-term strategy. It requires a good understanding of how markets work, accepting a degree of risk and diversifying investments to limit exposure to losses.

What are the different accounts for investing in the Stock Market in New Zealand?

To invest in the stock market, you need a specialised account to hold your financial assets (such as shares, bonds, ETFs) and to manage your transactions. In New Zealand, several types of investment accounts are available, each with its own tax implications, contribution rules, and investment goals:

Here’s a comparative table with an additional "Investor Profile" column to help match the accounts to your objectives and experience level:

Once you have set up your investment account, you will need to choose a financial intermediary to execute your trades. Here are the main options:

• A financial advisor: Offers personalised advice and holistic financial planning, ideal for investors seeking tailored strategies.
• An online broker: Best suited for independent investors wanting access to a wide range of local and international markets at competitive fees. Examples in New Zealand include Sharesies, Hatch, and ASB Securities.
• A robo-advisor: Provides automated, algorithm-driven investment management based on your risk profile, with low minimum investment thresholds (e.g., Kernel Wealth, InvestNow).
• A CFD broker: Suitable for active and experienced traders looking for leveraged products in forex, commodities, indices, and equities.

What to invest in on the Stock Market?

The Stock Market offers a wide range of financial products allowing you to diversify your portfolio according to your goals, risk appetite and investment horizon. Here are the main types of assets in which it is possible to invest:

Share Trading

Shares represent a portion of a company's capital. By purchasing a share, you become a shareholder and may receive dividends (a share of the profits) and hope for a capital gain upon resale if the price increases. Shares are investments with high potential returns, but also with high risk, as their value depends on many factors (company results, economic situation, geopolitics, etc.).

The best stocks to invest in depends on your goals and investment style. Thus, you won’t invest in the same stocks whether you’re looking for a regular return or a significant capital gain.

• For a regular return: we will favour the most stable stocks such as Astrazeneca, Total or McDonald's.
• For significant capital gains potential: growth stocks such as Tesla, NVidia, Apple or Airbus should be favoured.

Our Opinion

Shares are suitable for investors willing to accept market volatility in exchange for the prospect of higher long-term gains. Sector and geographical diversification is essential to limit risk.

ETF (trackers)

ETFs (Exchange Traded Funds) are index funds listed on the stock exchange. They replicate the performance of an index (such as the NZX 50, the S&P 500 or the MSCI World) by investing in all the securities that make it up. ETFs are traded like shares, in real time, and allow for broad diversification at a lower cost.

Our Opinion

ETFs are particularly suitable for beginner or intermediate investors wishing to easily gain exposure to a market or sector, without having to choose each stock individually. It is an excellent tool for long-term passive management.

Unit Trusts

Unit Trusts are collective investments actively managed by professionals. They pool the savings of multiple investors to build a diversified portfolio, according to a defined strategy (shares, bonds, mixed, thematic, geographic, etc.). Unlike ETFs, their valuation is done once a day, and their fees are generally higher.

Our opinion

Managed funds are for investors who prefer to delegate the management of their portfolio to experts. They are well suited to those who wish to benefit from a structured management framework, at the cost of a return often lower than ETFs, due to fees.

Obligations

Bonds are debt securities issued by governments or companies. By purchasing a bond, you lend money to the issuer, who undertakes to repay you at maturity, with the payment of regular interest (coupon). Bonds are generally less risky than stocks, but offer a more moderate return.

Our opinion

Bonds are an essential component of a balanced portfolio, especially for cautious investors or those close to retirement. They help stabilise overall performance and ensure regular income.

How to invest in the stock market when you are a beginner?

More and more young people are now getting involved in stock market investing, but there is no age limit to starting in this field. However, as a beginner investor, it is necessary to take some precautions before getting started.

• The easiest solution is to entrust the management of your investments to a third party whose job it is, such as a financial advisor or software specially developed for this purpose, such as a robo-advisor.
• It is also possible to make your own investments on the Stock Market, but in this case, it is preferable to take the time to train yourself and take an interest in the functioning of the markets before you start investing your money.
• Since an investor does not become profitable overnight, it is also preferable to not invest money in the Stock Market that you may need to live on or to cope with unforeseen expenses.
• Similarly, it is necessary to put in place a precise investment strategy and ideally in the long term by setting achievable objectives and taking risk into account.

When to Invest in the Stock Market?

While it's possible to make stock market investments at any time, it's essential to identify good opportunities before buying securities. To know if it's the right time to buy a share or shares on the stock market, you need to ask yourself these simple questions:

• What is the current economic situation? Is there growth, or are we in a period of crisis?
• What level of risk are you willing to take? An investor with a high risk appetite will frequently find interesting opportunities in the stock markets, while a cautious investor will prefer to wait before investing.
• What is a listed stock really worth? The intrinsic value of companies listed on the stock exchange must be defined in order to know if it is the right time to acquire the shares.
• When does the company pay its dividends? Finally, if you have opted for a yield strategy with shares that pay a dividend, you must hold these shares no later than the day before the ex-dividend date.

Why Invest in the Stock Market?

Investing in the stock market offers numerous advantages for growing your wealth, protecting your capital against inflation, and diversifying your sources of income. Here are the main reasons to invest in the financial markets:

• Growing your savings in the long term: stock markets have historically generated attractive returns over several decades. Regular, long-term investment allows you to benefit from the growth of businesses and the economy.
• Protecting your capital against inflation: Uninvested savings lose value over time. By targeting a return higher than inflation, the stock market makes it possible to maintain, or even increase, the purchasing power of your capital.
• Generate passive income: Some shares pay regular dividends. Bonds pay coupons, offering a stable income to the investor.
• Diversify your assets: The stock market can complement property investments or secured savings products.
• Good diversification reduces exposure to a single type of asset or risk.
• Easily access global markets: With online brokers and ETFs, it is possible to invest in thousands of companies around the world. This allows you to position yourself in different sectors, geographical areas and levels of economic development.

Good to know

The stock market is a powerful tool for investors ready to adopt a long-term vision. Well managed, a stock portfolio can become a lever for sustainable growth and a pillar of your wealth strategy.

Which broker to choose to invest in the Stock Market in New Zealand?

To invest in the stock market, it is essential to go through an approved financial intermediary, called a broker. They transmit your buy and sell orders to the markets. The choice of broker directly influences your investment experience, the fees you will pay, the products available and the tools at your disposal.

Here are the main categories of brokers available in New Zealand, with their characteristics:

Expert Opinion:

• An independent investor who wants to diversify at a lower cost will favour an online broker.
• An active trader will opt for a CFD broker, being aware of the risks.
• A beginner or long-term saver will prefer automated management with a robo-advisor.
• Finally, a cautious profile or one attached to their bank will use a bank broker, despite higher fees.

How much money do you need to invest in the Stock Market?

The money needed to invest in the Stock Market will depend on various factors, including your personal financial situation. Here are the rules to follow if you want to get started:

• Investing a portion of your savings in the stock market: It's important not to put all of your savings into stock market investments. You need to keep some of your savings to use in case of need. Ideally, if you can, keep 20% of your capital in a secured investment or a classic savings vehicle and invest 80% in the stock market.
• Investing in the stock market with a small budget: It's entirely possible to invest in the stock market with a small budget. It's not necessary to have a large amount of capital to start building a stock portfolio. NZD 500 to NZD 1,000 will be enough to create the basics of it, and you can then reinvest your income from dividends or capital gains to buy new securities.
• Don't put all your eggs in one basket: While the stock market is attractive in terms of return and investment, it's necessary to spread the money you invest in the stock market, ensuring that your portfolio is diversified. For example, you can invest part of it in shares, another part in one or more funds, and another part in bonds.

Investing in the Stock Market with a Small Budget: Our Tips

If you are a beginner investor and want to invest small amounts in the Stock Market, you have two solutions:

• Invest your current savings: this is possible from NZD 500
• Invest a small amount each month : you can also freely make payments into your stock market investment accounts such as a New Zealand securities account in order to gradually fund it.

What is the taxation on stock market investment income in New Zealand?

Income generated from stock market investments — including capital gains, dividends, and interest — is subject to specific tax rules in New Zealand. However, the New Zealand tax system differs significantly from many other countries, especially regarding capital gains.

Here is an overview of how investment income is taxed depending on the type of account and the nature of the income:

1. No General Capital Gains Tax

In New Zealand, there is no comprehensive capital gains tax. However, capital gains can be taxable if you are considered to be trading with the intention of making a profit (such as frequent buying and selling of shares) or if you invest through certain structures like PIE funds with specific characteristics.

Key points:

• Occasional investors usually do not pay tax on capital gains.
• Frequent traders or those investing with the primary intention of resale may be taxed on their gains as income at their marginal tax rate.

Note

The Inland Revenue Department (IRD) assesses the intention behind transactions to determine tax obligations.

2. Taxation of Dividends

Dividends received from New Zealand companies are generally subject to income tax. Dividends typically come with imputation credits, reflecting corporate tax already paid, which can be used to reduce your income tax liability.

• Gross dividend (cash + imputation credit) must be declared as income.
• The imputation credit can offset your total tax bill.
• Dividends from overseas companies are also taxable and may involve foreign withholding tax credits.

3. Taxation by Account Type

4. Treatment of Investment Losses

If you incur a loss:

• For typical investors (buy-and-hold strategy), capital losses are not deductible because capital gains are not taxed.
• For traders taxed on income account, losses may be deductible against other income.

5. Special Case: Imputation Credits for Dividends

When you receive dividends with imputation credits:

• You must declare the gross amount (cash dividend plus imputation credit).
• You can use the imputation credit to reduce your overall income tax payable.
• If your tax liability is lower than the imputation credit, you may be entitled to a refund.

Example

 If you receive a $700 dividend with a $300 imputation credit, you declare $1,000 as income and use the $300 to offset your tax bill.

Our 5 tips for successful stock market investing

Now that you know the basic rules of stock market investing, here are five simple tips to follow to quickly become a profitable investor:

• Set achievable goals: Every investor should set financial goals for their various investments. These goals will depend on the purpose of the investment. Is it to prepare for retirement or to finance a purchase or specific project? A motivating goal will be an engine that allows you to dedicate yourself to your investment with passion.
• Learn about the stock markets: Good knowledge about the stock markets and how they work is essential if you want to make profitable investments. So take some time each week to inform and educate yourself. There are many online training modules allowing you to learn analysis methods, and you can also consult targeted financial news feeds.
• Favor a long-term investment horizon: Unless you are an expert in the financial markets and want to speculate in the short term to generate maximum profits in a short time, it is more prudent to invest with a long investment horizon. Speculation presents many risks that you can avoid with progressive investment.
• Know your risk tolerance: You must define as precisely as possible the level of losses and variability of your capital that you are willing to assume. Remember that the higher the potential return of an asset or market, the higher its level of risk. A strong aversion to risk should guide you towards the least risky instruments such as bonds or certain secured funds. If you have a high tolerance for risk, you can try riskier investments such as stocks or cryptocurrencies.
• Don't let your emotions take over: Finally, investing in the stock market is an activity that can generate all sorts of emotions such as stress, enthusiasm, or fear. A good investor must not let these feelings cause them to make bad decisions and must always keep their initial strategy in mind and stick to it.

Want to invest in the stock market yourself and independently? Join a quality online broker without delay and start placing your orders on the market.

P. Laurore

Finance expert

Co-founder of HelloSafe and holder of a Master's degree in finance, Pauline has recognised expertise in personal finance, which she uses to help users better understand and optimise their financial choices. At HelloSafe, Pauline plays a key role in designing clear, educational content on savings, investments and personal finance. Passionate about financial education, Pauline strives, with every piece of content she oversees, to provide reliable, transparent and unbiased information for independent and informed financial management. To this end, she has tested over 100 trading platforms to help internet users make the right choices.