I am not a huge fan of the share broking industry. I am required to use a broker to be able to buy and sell shares on the NZX. But like real estate agents and car salesmen the primary objective of share brokers is generating fees through more transactions. It is in their interests to encourage their clients to buy and sell shares because they clip the ticket with each transaction.
Having set up several share funds with my students in recent years I have a healthy skepticism about the fees charged by share brokers in New Zealand. They are remarkably similar among the few share broking firms. They are also high, especially for small scale investors. This can discourage young people from exploring the possibility of investing in shares. Yet it is crucial that our young people are exposed to the principles and realities of investing not just for their own personal gain but also for our future national prosperity. As a nation we are remarkably financially illiterate. This is costing us dearly.
Our financial ignorance is partially a result of an education curriculum that has largely been shaped by university pre requisites. Practical financial skills have not been taught in our schools or tertiary institutions. People are left to try to teach themselves or rely on financial advisers, sometimes of dubious motives and ability. The financial sector is an environment that tends to attract sharks.
From a national perspective our financial ignorance is very damaging. The aversion of many kiwis to investing in shares has meant many of our most profitable and exciting companies have been brought up by overseas interests. This means their profits disappear offshore. It is these businesses that generate actual jobs, incomes and output , far more than real estate.
The sooner we start teaching our young people about the nuts and bolts of investing the better. Creating an investment culture in our young people would be a win- win for all of us. It can also be a lot of fun.
I thought I would share the portfolio picks from my students from 2017. They were required to pick 10 shares for their portfolio. They invested $ 25000 of our money for a period of four years using a buy and hold strategy. They had to analyse and present on a range of companies then select their portfolio. The arguments were robust and very informed. They choose a portfolio I would describe as balanced, yet aggressive. So far their portfolio has far outperformed the wider market. They were a very smart group of guys. I will be interested to see how their selections rate against the brokers’ picks this year.
Their share picks were:
A2 milk, EBos, Fletcher Building, Gentrack, Infratil, NZ King Salmon, Summerset, Vital Healthcare, Evolve, Restaurant Brands
Peter Lyons teaches Economics at Saint Peters College in Epsom and has written several Economics texts.