Latest News & Updates

The Guide to Investment Tax.

Monday, February 19, 2024

It's important to understand the difference between investment tax rates and personal tax rates when saving for retirement or if you have already retired. In New Zealand, individual income tax rates range from 10.5% to 39%. We assume that you are aware of your personal tax rate. As an investor, you have the option to pay more or less tax, depending on the type of investment you make and the vehicle you hold your investment in. This guide explains how three (4th to follow) of the most commonly used investments are taxed and outlines legal steps you can take to reduce your tax rate and maximize your returns.

Part 1. Cash, term deposits and bonds

In New Zealand, bank accounts offer low-interest rates on cash deposits. However, by investing in term deposits, you can earn higher rates of interest. Term deposits require you to lock up your money for a period of time, ranging from 3 months to 5 years.
If you hold cash, term deposits, or bonds in your own name or in a joint account, the interest you earn is taxed at your marginal tax rate. If you hold them in a family trust, the trustee tax rate is 33% but will increase to 39% from 1 April 2024.
To pay less tax on the interest earned, holding cash, term deposits, or bonds through a Portfolio Investment Entity (PIE) is recommended. In a PIE, your maximum tax rate is only 28%, which is 11% less than the maximum tax rate for individuals or trusts.

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The do's and don'ts of investing in a down market.

Tuesday, November 21, 2023

Investing in a down market, also known as a bear market, can offer several benefits for savvy investors who approach it with a strategic mindset. While investing during a market downturn may seem counterintuitive, these challenging periods present unique opportunities.

• Dollar-cost averaging: investing fixed amounts regularly to buy more when prices are low and fewer when prices are high, leading to a lower average cost per share and potential long-term profits.
• Dividend yields: attractive option during a down market, providing investors with a consistent income stream.
  Rebalancing opportunities: maintaining risk tolerance and optimizing potential returns by selling overperforming assets and reallocating funds to underperforming ones.
• Investing during a down market: positioning investors to benefit from potential significant upswings in the future.
  Psychological growth: Navigating a bear market requires discipline and emotional control; investing during such times can help build resilience and better understand risk tolerance, which are valuable skills for long-term success.
• Bargain opportunities: distressed assets or industries can present unique investment opportunities with potential for substantial gains if assets recover.
  Long-term perspective: focusing on the long-term performance of portfolios rather than reacting to short-term market fluctuations.
  Diversification benefits: certain assets, such as bonds or gold, tend to perform differently than equities during market downturns, making them valuable diversification tools to mitigate overall portfolio risk.

However, investing in a down market comes with inherent risks. It requires careful research, a clear investment strategy, and a willingness to endure short-term volatility. Investors should seek guidance from financial professionals to ensure their approach aligns with their financial goals and risk tolerance.

Want to find out more? Simply give Mark Jones a call on 0800 404 202 or send him a message

This content has been provided for information purposes only and is not intended as a substitute for specific professional advice on investments, financial planning or any other matter. Read our disclaimer notice and privacy statement

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