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How to Get Rich, Slowly.


I am often asked how best to make money and protect capital. Record low interest rates around the world are making it difficult for investors to attain an adequate return from bank deposits. Should you invest in Property, Shares, Cash or Fixed Interest? The short answer is yes, to all of them. Every asset class has their merits, and spreading your risk is the only free lunch you will get on the way to wealth creation. A rudimentary example of how the different asset classes perform in terms of their risk and return characteristics can be seen in (Figure 1) below. 

(Figure 1) 

I would like to share two concepts with you that will help you to grow your wealth. Firstly, the ‘Time Value of Money’. Better known as the ‘Compounding Effect of Interest’. One clever chap named Albert Einstein made a pretty bold claim. Stating:

Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it.”

In short, money makes money, and the longer you can let it do this the more pronounced the effect. Let us use three simple examples to explain the concept. 

1) A 20 year old earning $50,000 per annum and saving 3% of their income in KiwiSaver will have saved $314,000 NZD by 65. Boost this to 8% and you could be looking at $575,000 after tax, fees and inflation. 

2) A 35 year old with the same income and contributing 3% will have considerably less, an estimated $160,000. However not all is lost, if less time is met with increased contributions (8%) an estimated $290,000 will be saved after fees, tax and inflation.

3) A 50 year old with the same assumptions will be looking at an estimated $61,000 by 65 with 3% contributions and $110,000 with 8%. 

The moral of the story is to start early. If time is against you will need to work a little harder. The estimates above were made using the ‘Sorted’ calculator. This can be found by going to: Sorted is an independent free resource, which offers a number of great articles and calculators that can help you better manage your debt and retirement savings. I strongly recommend everyone jump on here and have a financial health check-up at least once a year.

Whilst I typically deal with individuals who have $500,000 or more to invest, there are a number of products and services to help you to get started in your journey of wealth creation. KiwiSaver is obviously the largest and most widely spread in New Zealand. However, it is not without its drawbacks. The money is locked in (with a few exceptions) until you’re 65. There are other solutions which offer a little more freedom such as Smartshares, run by the NZX ( which allow you to get started with as little as $500 NZD and have the added bonus of being able to withdraw the funds earlier if required. Smartshares also have a regular savings scheme, starting with as little as $50 per month. Once you have built up a good base, look towards direct equities and bonds (also known as shares and fixed interest). Direct equities and bonds have additional benefits over passive investing, such as being able to avoid companies which are expected to underperform and to ensure there is no exposure to companies you may be opposed to ethically, such as arms manufacturing, gambling or mining. 

Secondly, a key concept to be wary of is 'Investor Psychology' (Figure 2). During the Global Financial Crisis (GFC) many hours were spent reassuring concerned investors that the markets will recover. Which they have, the NZX50 is up over 100% since the lows of 2009. Some investors unfortunately sold down, realising their losses.  

(Figure 2)

Removing the emotion from an investment decision is essential. A good adviser will provide you with prudent, disciplined, well founded decisions, based on years of training and experience. This will offer you with the steady hand required to make the right decisions. Something which is not as easy as it sounds when people are saying “zero is an option’ and “this will be the second Great Depression”. 

In summary, the best way to make money is to do so slowly, with regular contributions and regular reviews of your asset allocation to match your risk profile. If someone ever says that you can get rich quickly, walk away. The financial markets are highly regulated in New Zealand and Authorised Financial Advisers are required to always put your best interests first. If you want excitement buy a lotto ticket, investing should be measured, requires patience and above all, discipline. 

If you have any questions or comments leave them in comment section below.


This article was written by Jeremy Sullivan – Authorised Financial Adviser at Hamilton Hindin Greene Ltd. The article represents general information and does not constitute personalised financial advice. If you would like to know if the investments mentioned are suitable for you please contact your investment adviser. A secondary disclosure statement is available free of charge by going to or by calling 0800 10 40 50.

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