The Fifty of New Zealand Fund (FONZ) is a way for both first time and experienced investors to ‘buy the market', as each FONZ Unit represents securities in the top 50 companies listed on the NZSX Market.
The added savings option was developed following feedback from people already investing in Smartshares, and addresses a gap that no existing savings vehicle could fill, according to NZXFM Director Mark Weldon.
“We know that New Zealanders' savings rates are poor by OECD standards. We could also see that there was a gaping hole where genuinely simple, low cost, high yield savings products should be.
“Making a savings plan part of the FONZ offer means people can invest and save easily at the same time,” said Weldon.
FONZ unit holders can contribute as little as $50 a month to increase their FONZ holdings and will have their dividends reinvested automatically unless they opt to take them in cash.
“New Zealand companies typically pay strong dividends, so this is another way for investors to increase their savings without actually having to do without the cash. International research tells us this is the most effective way to encourage savings by earmarking money for savings before it goes into people's pockets,” Weldon said.
In addition, a binding ruling from the IRD means FONZ pays no tax on share price gains.
NZX also views FONZ as a viable alternative to the traditional master trust structure that employers tend to use to provide workplace-based savings schemes for their employees.
“Investing directly in FONZ automatically provides a strong and diversified portfolio across all major sectors of the economy, along with a means of increasing each individual's holdings via direct debit from payroll.
“It's a genuine alternative that companies – and individuals – would do well to explore when they're making their savings decisions,” Weldon said.
