(Image: Jihee Junn)

How lockdown made us rethink how we save and invest

Despite the economic downturn, recent months have seen more everyday New Zealanders investing their money than ever before. But why?

What with all the financial uncertainty of Covid-19, it’s a surprise anyone would choose a national lockdown as the time to start investing. But that’s exactly what 24-year-old Hanoz* did back in March. Stuck at home in Auckland with little to do after recently returning from a stint working in Singapore, Hanoz found himself thinking a lot about money and what he could do to make his savings grow.

“I started looking at my finances over lockdown and assessing where I wanted to put my money, but the banks weren’t really providing great options with term deposits. The options were really pointing me towards the stock market,” says Hanoz who decided in the first week of alert level four to open an account with investment platform Hatch, purchasing his first shares in US companies not long after. So far, he says the experience has been both fun and successful. 

“It’s gone in a pretty good direction over in the US, and overall, I’ve liked assessing the potential in companies and seeing what companies turn out [to be successful], so spotting those trends has been a lot of fun.”

But Hanoz wasn’t the only one who decided lockdown was the chance to dip his toes into investing. More than 20,000 New Zealanders signed up to Hatch, taking its customer base to nearly 50,000 – an almost 40% increase. And at Kiwi Wealth there was a 30% increase in uptake for their managed funds from the start of level four lockdown to end of July.

“Lockdown gave Kiwis a chance to reevaluate their finances,” says Kristen Lunman, co-founder and general manager of Hatch. “Thousands of Kiwis waiting on the sidelines saw an opportunity when the market crashed, and they viewed it as an ideal time to buy quality shares on sale.  

‘Lockdown gave Kiwis a chance to reevaluate their finances’ (Photo: Getty Images)

While amateur investing has grown hugely over the last few years thanks to easy-to-use online platforms, lower investment minimums and the role of KiwiSaver in familiarising New Zealanders with investing, lockdown saw this phenomenon drastically spike. Many first-timers, like Hanoz, simply found themselves with the time and willpower to finally try their hand at sharemarket investing. For others, perhaps with a bit more experience, they saw the Covid-induced downturn over lockdown as the prime opportunity to snap up bargain shares

But for longtime investor Armi, Covid-19 was a striking wakeup call. Having been a “set and forget” investor for the last 20 or so years, Armi realised she needed to be more engaged in what her investments were doing when half her portfolio was wiped out in March. 

“This one stock, for example, I’d had for the past seven years and it was already 160% in terms of profit. Then when Covid-19 hit, it just wiped out everything,” she says. “I realised then that yes, we should let our profits run, but we should also have a definite point where we say ‘I want to monetise now’.”

“I didn’t used to look at stock prices on a regular basis but I realised when things like this happen, it’s important you always have that awareness of when to take action.”

The financial downturn caused by Covid-19 was a tough learning curve for many New Zealanders. Redundancies, pay cuts, and an economy in freefall highlighted how quickly things could take a turn for the worse. It made a lot of people nervous, including Wellington-based investor Maree who decided over lockdown to set aside an emergency fund – a financial safety net for whatever life happened to throw her way.

“Luckily, [my partner and I] were still fully employed over lockdown, but we realised the risk factor. It made us think about how we should have at least three months worth of income put away because if we ever needed money, we’ve got access to a lump sum,” says Maree who decided in April to set up a “rainy day” account. But instead of a savings account where interest rates were historically low, Maree decided to put her money into a managed fund.

A sign on State Highway 1 in Wellington during lockdown in April 2020 (Photo: Mark Tantrum/Getty Images)

“They’re easy, they’re accessible and you can see what you’ve put in and how you’re tracking. You can change your risk profile or take money out yourself – you don’t have to ring a call centre and get put on hold. And I don’t have to buy and sell [the assets] myself so it’s really convenient,” she says, who now has a total of three managed funds, each one set up with a specific investment goal. 

For her two young children, she’s set up a fund with a high-risk profile designed for the long term – a nest egg for her daughters to access 20 or so years down the track. For herself, she’s set up a fund with a conservative risk profile designed for use “sooner rather than later” for smaller purchases, like an iPad, for example. And for her and her partner, she’s set up an account with a balanced risk profile designed for the medium term –  a “rainy day” fund in the event of something unexpected like Covid-19 wiping out the family’s immediate income.

“Interest rates are so bad at the moment, so why would I put my money into a savings account? If I can get a better return with a bit more risk involved, then why not?” she says.

“I want to be in a position where money’s not going to be a problem. It’s not hard to [invest], and even just $5 or $10 a week can really make all the difference.”

*Surnames have not been used for financial privacy.



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