Why ETFs May Not Suit Every Investor in New Zealand

ETFs are a fantastic vehicle for getting started in the stock market. They're well diversified across as many as thousands of company shares, they're easy to purchase through any broker on a stock market, they track a stock index assembled by investment professionals, and they have funky stock tickers sometimes like UFO or FANG.
Unfortunately in New Zealand, ETFs aren't always the best vehicle to invest in an underlying index as they suffer from a few disadvantages. Unlisted index funds, such as those offered by Kernel Invest, avoid many of these disadvantages. The first disadvantage is fees. ETFs are listed on a stock exchange of course, which can be expensive. These costs must pass through to investors, as management fees. Being unlisted often means some of these regulatory barriers are avoided, meaning their cost base is often lower. Another disadvantage is dividend drag. This is where there's a lag between when the fund earns a dividend, and either reinvests back into the index holdings or shares this with investors. The third disadvantage is taxes. Investors in New Zealand have the advantage of lower taxes on domestic listed and unlisted fund investments, called the portfolio investment entities (PIE). They benefit from having a maximum tax rate of just 28% under the prescribed investor rates (PIR) tables. Income, on the other hand, is taxed at up to 39%.
Kernel wrote a great article on this topic here: kernelwealth.co.nz/blog/why-e... . They didn't sponsor this video but they raised a lot of great and informed points in the article that I elaborated on in this video.
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// TIMESTAMPS
► 0:00 Intro
► 0:36 Overview of Funds
► 2:31 Disadvantage 1: Taxes
► 4:35 Disadvantage 2: Dividend Drag
► 5:54 Disadvantage 3: Fees
► 7:37 Outro
Disclaimer:
I am not a financial adviser. This video is for education and entertainment purposes only. Seek professional help before making any investment decision.
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[@jacobcreech4382]

Bro your channel should be required viewing for high schools - nice clear explanations.

[@BrentColeman]

Haha appreciate it man! Glad the video was helpful!

[@PowerboatTraining]

great content

[@BrentColeman]

Glad it was helpful! Thanks for watching!