Modern Investing, Made Simple

If you spend your working life making decisions based on evidence, probability and risk, you already have the right instincts for investing. The trouble is that most people never get to apply that mindset to their own money, because the investment industry has made things look far more complicated than they need to be.

I see this across every kind of client, business owners, salaried professionals, tradespeople, people early in their careers. The portfolios that land on my desk often have ten, fifteen, sometimes twenty or more individual funds, built up over years through different KiwiSaver providers, old workplace schemes, and product pitches from various advisers. Almost nobody set out to build something that complicated. It just accumulated.

Why simplicity deserves a seat at the table

Complexity feels like it should mean sophistication, more funds, more strategy, more effort going into managing your money. In practice, a lot of that complexity adds cost and overlap without adding much real diversification or return. Many of those funds hold similar underlying companies, just packaged differently, so you end up paying multiple layers of fees to own roughly the same exposure several times over.

One structure I often discuss with clients is the 3-fund portfolio: a small number of broad, low-cost index funds covering domestic shares, international shares and, depending on the person’s situation, bonds or cash. It is not the only sensible way to invest, but it is a useful example of how far you can strip complexity away and still end up with a properly diversified portfolio.

Fund management and financial planning are not the same job

This distinction matters and it gets blurred constantly. A lot of what gets called “financial advice” in New Zealand is really fund management with an advice licence attached, the adviser’s main job is picking and switching investments. That is a legitimate service, but it is a narrow one.

Financial planning is broader. It covers cashflow, debt structuring, how your KiwiSaver fits your overall plan, insurance, retirement projections, and estate planning, with investment selection as one part of a much bigger picture. Knowing which of these two jobs you are actually paying for, and what you need, is worth working out before you sign anything.

What the evidence actually shows

The idea behind a simple, low-cost portfolio is not new. It was popularised by Vanguard founder John Bogle, and it is backed by a large body of independent research. The SPIVA scorecards, which compare actively managed funds against their benchmark indexes over time, consistently show that a majority of active managers underperform their benchmark after fees, especially over longer periods. That does not mean active management never works. It means that beating a low-cost index consistently, after costs, is genuinely hard to do, for professionals and individuals alike.

The real cost of fees in New Zealand

Fees do not feel dramatic day to day, which is exactly why they are easy to underestimate. Here is a purely hypothetical, illustrative example to show the mechanics, not a prediction or promise of any outcome.

Imagine a $500,000 portfolio earning 7% per year before fees, held for 30 years, with no further contributions.

Scenario	Approx. all-in fees	Illustrative value after 30 years
Advised, actively managed portfolio	Around 1% per year	Roughly $2.85 million
Low-cost 3-fund style portfolio	Around 0.15% to 0.30% per year	Roughly $3.64 million

On these assumptions, the gap is around $790,000. These figures are illustrative only, based on a constant assumed return and constant fee that will not match reality, and are not a guarantee, forecast or personalised recommendation for any individual. Actual returns, fees and outcomes will vary. The point is not the exact number. It is that fees compound in the same direction as returns, just working against you instead of for you, and even a difference that looks small on an annual statement can become very large over decades.

How this looks in practice

For New Zealand investors wanting a straightforward, low-cost approach, index-tracking ETFs from providers like Smartshares, accessed through platforms such as ASB Securities or InvestNow, are a reasonably simple way to build something close to a 3-fund structure. I am not suggesting these are the only options or that they suit everyone, just noting that the tools to do this cheaply already exist here.

Bottom line

None of this is an attack on managed funds or on advisers who build more complex portfolios. Some clients genuinely want and benefit from active management or a more hands-on approach. The point is simply that fees and complexity are a choice, and it is one worth making consciously rather than by default, because the consequences compound for decades.

This post is for general educational purposes only. It is not personalised financial advice and does not take into account your individual circumstances, objectives or risk tolerance. If you would like to talk through what a sensible investment structure looks like for your situation, a free discovery session is a good place to start.