How to Invest in Shares NZ

Are you looking into buying shares? Before you do, there’s a lot to learn - shares can be a risky and volatile investment, and if you’re not well informed, you could lose much more than you make.

To help you get started, we’ve put together a straightforward guide for beginners covering how to invest in shares from NZ.

For this blog, we will be referring to publicly listed shares available on a stock exchange such as Air New Zealand (AIR) on the New Zealand Stock Exchange (NZX) or VISA (V) on the New York Stock Exchange (NYSE).

When a company decides to "go public" and list on an exchange, it issues a certain percentage of the company's ownership, otherwise known as company "shares", to investors.

This is referred to as an Initial public offering (IPO), which is often facilitated through an Investment bank. Once an IPO is complete, then a set amount of company shares is available to publicly trade on a stock exchange , which we call the stock market.

Companies list on stock exchanges to access public capital markets, allowing them to raise funds from a broad base of investors while providing liquidity for existing shareholders

The stock market is a secondary venue in which existing shares are traded, so when you buy a share, it is an existing share that you are trading with someone else, versus directly with the company.

The share price is set daily based on the demand and supply of market participants, as someone is willing to buy at that price and someone on the other end is willing to sell.

The supply and demand is what sets the company valuation, known as its market capitalisation, which is the share price multiplied by the shares on issue.

The Inland Revenue Department (IRD) states

So how does buying shares work? When it comes to share trading, there’s a lot going on.

Firstly, how do we know we’re looking at the right company? Each company has a unique ticker code when trading on a stock exchange.

Some are very similar to their company name, such as AAPL for Apple and META for Meta Platforms.

When searching for the share related information of a company, be sure that you’ve got the correct ticker, which is often easily found on reliable resources such as Yahoo Finance.

Next, and perhaps the most important aspect of a share, is the share price.

There are many different forms of pricing in the share market, such as market price, limit price, close price and many more.

If you were to go on a website or trading platform such as Kernel Shares and ETFs, the price that you see displayed under the company’s ticker is the last traded price; this is what is called the “market price”.

The market price is the price at which the last material amount of shares was sold by the seller and bought by the buyer.

This is published almost instantly by the stock exchange; however, market information such as prices can be delayed by twenty minutes by service providers, as it can be expensive to receive real-time pricing data and most often requires a subscription.

Investors also trade using “limit” prices.

These are also referred to as a “BID” price, the price an investor is willing to buy/bid at and an “ASK” price, the price an investor is willing to sell at/ask for.

The “close” price is the last traded price in the closing auction of the relevant stock exchange and is often the indicator of the share price performance over the day.

Once an order is executed in the market, it falls into an order book. The order book is a collation of the combined market orders, which is kept under a broker or brokerage service that may then show this to the market.

The aggregation of this publicly visible orderbook is called the market depth, which establishes the demand and supply of the company shares and pretty much sets the share price in the stock market.

At a fundamental level, the price is based on how active traders think a company is worth. It is strongly influenced as to how those investors think the company will perform in future and considers things like:

• The company’s financial performance (profit, debt, etc).

• Future growth potential for the company and the sector it is operating in.

• News about the company and its directors.

• Risks to the sector or market it operates in.

• How investors are feeling about the company (market sentiment).

Some well-known investors emphasise the importance of avoiding losses when investing. While it’s not possible to eliminate the risk of a negative return, you can reduce it by:

• Choosing your investments carefully

• Taking a long-term approach (10+ years)

• Spreading your investments across different companies, sectors, or funds (diversification)

More on these concepts later.

We’ll give it to you straight - shares can be risky.

This is mostly due to how much a share price can move over a period, whether it’s over a day or even a year. There’s also a lot of information surrounding a company, such as core business activity, competitor activity and economic activity.

Depending on the maturity of the company, such news can create “noise” which can impact the share price in which they may go up and down in value frequently and unpredictably.

Before you buy shares, you’ll need to be comfortable seeing your investments go up and down in value and not panic sell (which is harder than it sounds). Remember not to pay attention to the noise and revisit your investment goals and time horizon.

Traditionally, when buying shares in individual companies, you’ll also need to have the time and know-how to:

• Research each company,

• Read their financial reports,

• Understand the market, and

• Spot wider trends early.

It’s a hands-on approach that requires ongoing effort and confidence.

If you plan to only buy individual shares, you’ll also need to diversify your own portfolio, which generally means buying a minimum of 20-30 different companies in different industries and geographical locations (and finding, researching, and keeping up with every single one, plus keeping an eye on the competitors!).

This is a lot of work, and for most investors, it’s a bit too much. If you don’t have the knowledge, time, or inclination to do all that work, thankfully, there’s an easier way.

The Financial Markets Authority (FMA) defines managed funds as:

Managed funds provide diversification as the holdings can consist of up to thousands of securities, as well as exposure to a range of sectors such as Information technology, Financials, Energy and may further diversify based on country allocation, such US, Europe, UK and Emerging markets.

Some funds can offer thematic strategies like the Kernel Clean Energy and Kernel Global ESG funds.

Buying these is a great way to diversify your portfolio and financially benefit from the performance of the market, without doing days and days of research yourself.

• Actively managed funds are a portfolio of assets hand-picked by an investment professional after conducting in-depth research and closely watched as the market moves, which forms the “active” management concept of a portfolio. They aim to outperform the market but tend to have higher fees than passive funds.

• Index funds, on the other hand, are often termed 'passive' investments track a market index (like the S&P 500 or NZ 20). Index managers aim to match an index's performance and can often offer lower fees to investors as there is no investment professional hand-picking or reviewing the ‘best’ stocks.

The thing is, despite their lower fees, index-managed funds tend to outperform actively managed funds according to research in the 2024 S&P Indices Versus Active report.

Too long didn't read (TLDR); few winners stay winners.

The report proves that over the 15 years ending Dec 2024, no category saw active funds outperform their benchmarks, even though short one year windows can show pockets of active management success, consistent outperformance lacks persistence against the benchmark.

Every investor needs to make their own informed decisions, and should seek professional advice, but for the reasons above, we believe that for most investors it’s a good idea to hold mainly passive investments in their portfolio.

Read more about active vs passive investing

An effective way to manage risk and volatility in your portfolio is through diversification.

Investing in one index fund generally isn’t enough to fully diversify your portfolio. You may want to invest in a few funds that suit your risk profile and investment goals to form your ‘core-satellite’ strategy.

This strategy involves building the “core” of your portfolio by allocating a large percentage (80-90%) to broadly diversified low-cost index funds.

Consider the remaining (10-20%) as “satellites” for higher risk, more speculative ideas such as thematic funds or individual shares.

It is important to be well-informed on what a particular fund offers, such as the number of securities, country exposure, sector allocation, etc.

This information is easily found on the fact sheets of a fund provided by the fund manager. As an example, we have linked the fact sheet to our Kernel Global 100 fund here. 

For the most part, the idea is that the core tracks the market and keeps things steady, while the satellite provides a chance to outperform without risking it all.

For more on this, you can Read our guide to core-satellite investing

Speaking of core strategies, it is key to understand the time horizon of your investments before you look at investing in index funds, shares, or managed funds.

Basically, however long you intend to hold your investments will be fundamental to the way you invest.

This is important because time is one of the best ways to protect yourself from volatility, which can fluctuate the stock market.

You see, growth investments such as company shares or index funds usually trend upward in the long term but may frequently dip in value over the short and medium term.

Simply, the longer you stay invested for the more likely to make a good return.

Whether it's buying a house, funding your retirement, or creating generational wealth, big goals often require patience. Long-term investing leverages the power of compounding returns, helps you navigate market volatility, reduces stressand is the most effective way to build substantial wealth for your future.

It's about patience and letting your money work for you over decades, not days.

Read our guide to investment horizons

Choosing individual shares isn’t easy. Picking a “good company” actually requires deep research into competitors, industries, and valuations.

Plus, ongoing monitoring of earnings, news, and macro trends. It’s time‑intensive and uncertain- which is why many investors prefer broad, low‑cost funds for diversified exposure.

• A good idea to start off by reading books, blogs and journals as much as you can on platforms like Kernel, Sorted, MoneyHub, and the Financial Markets Authority. Some books we recommend by seasoned investment professionals are: The Little Book of Common-Sense Investing (Bogle), A Random Walk Down Wall Street (Malkiel), The Psychology of Money (Housel), Common Stocks and Uncommon Profits (Fisher), and The Intelligent Investor (Graham). They all provide fantastic resources for beginner investors

• Once you have an understanding, read articles published by experienced traders or research analysts online. You can easily find these sources through CNBC News, Financial Times, Bloomberg articles or even websites like the National Business Review (NBR) or Interest (https://www.interest.co.nz.). However, tread carefully as you may see biased opinions and assumptions which may cause some “noise” mentioned earlier in the blog.

• When choosing what to buy, be as well-informed as you can be. Just like when you’re buying a house or a car. Look at product disclosure statements for fund managers, annual reports from companies, independent research, expert commentary, and news.

For more information on researching shares, check out the FMA’s guide to choosing buying, owning and selling shares.

When you’re ready to buy shares, there are several great platforms to choose from. Each platform has its own benefits and drawbacks, so consider your options before you start.

Kernel can be a great option to consider, as the platform offers managed funds, KiwiSaver, Shares & ETFs, which makes it efficient to set up your investment journey like a core-satellite portfolio.

• Fees - are they simple, transparent, and good value for money?

• Platform - is it easy to use, and can you monitor your investments online?

• All-in-one - can you build an entire portfolio in the same platform, including low-fee index funds alongside your share investments?

• Easy to understand - trading in USD can be confusing. Does your platform offer the ability to trade in NZD?

• Low entry point - some platforms have minimum investments that may make starting out tricky. Look for one that allows you to invest small amounts.

Find out more about buying shares via Kernel

Sometimes shares can go either way, good or bad investments. There’s a lot that can impact a company’s share price; however, the secret to choosing the “right” investment mix is by doing your homework, building a diversified portfolio, and matching your investments to your long-term financial goals.

Kernel has extremely competitive fees across three pricing options: core, plus and premium. Scroll down on this page to take a look at a calculator and see how our fees stack up against our competitors.

All you need is an Individual Kernel account, then to complete the digital form on the Shares & ETFs tab on the Kernel website. Once you’re a member, you just need to log into your Kernel account, top up your Kernel Wallet, and wait 1-2 business days for funds to clear.

Once they’re in your wallet, you can use those funds to quickly and easily buy shares via the shares and ETFs tab in your account dashboard.

To buy, just search for a share, then hit buy in the bottom right corner and follow the prompts.