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Choosing Between Shares, Index Funds, And Managed Portfolios For Real Goals
•Zebunisso Alimova
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Want a clear way to choose between stock picking, index funds, and managed portfolios without getting lost in jargon? We bring Elizabeth back to map three investing paths to the outcomes real people care about: learning with small stakes, building long-term wealth at low cost, and hitting a specific dollar goal on a specific date.
We start with direct shares and the allure of picking winners—why easy access via platforms like Sharesies or Hatch can be a great classroom, and how concentration risk means a single company can still go to zero. Then we unpack index funds in plain language: how broad baskets like the S&P 500 actually select companies, why fees are low, and why “set and forget” works best when your timeline is long and you can stomach the ride. Along the way, we puncture the Hollywood version of Wall Street and explain what really drives the constant price moves you see on your screen.
From there, we shift to managed funds and goal-based planning. We talk through diversified mixes that include shares, bonds, cash, and property, and how risk levels change for conservative through to high growth profiles. Most importantly, we highlight the power of human advice: aligning risk to your time frame, making adjustments after big life events, and keeping you on track when headlines turn loud. Whether you want $50k for education in seven years or you’re building a long-term nest egg, we break down how to choose a path that suits your life, not someone else’s hot tip.
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Hey guys, were you wondering about different investment options and what it all means? Well, listen up. I've got Elizabeth back. Hello, Elizabeth. Hello.
No, I think I've thrown you off with my like topic for this session with the different investment options because obviously that can be like really broad. That could be like property versus managed funds. But I was kind of thinking of questions that I get quite often, especially through social media, is should I be doing like shares ease? Should I be doing like passive index investing? Or like what is this managed fund stuff that I keep talking about on my accounts? So I thought it might be helpful to like kind of break them down a little bit. And basically to we've just been talking about direct investing quite a bit in terms of that accessibility piece. So like Shares and Hatch and all of those platforms
that have made it accessible for this generation. Yeah. Where we didn't have that when we were like teenagers, young adults. The option was like big funds with big starting balances or nothing at all. So that is kind of like to me a starting option of I want to understand what investing is all about, or I have play money and I want to like bet on black. I want to be like Microsoft is the winner and I want to put my money on them. Or I really like Mac makeup. And so I'm going to invest in them because I use them all the time and I think they're fabulous, or whatever it is. To me, it's more about like, what do I love? What do I think is going to be a winner? How do I understand investing and just like get started with as little as $5, right? But I'm not risking huge amounts of money. Because with direct investing, you are taking more risk. It's entirely just buying each company individually. So if I chose a really small company that's just starting out and they actually go under, then my money can go to zero. And that's where people do get a bit like confused about how much risk they're taking and investing. And can I lose all my money? So if it's something like direct investments on Sherzies or something, yes, it can all go to zero. Depending on what company you've chosen and how you've spread your money out.
SPEAKER_00
Yeah.
SPEAKER_01
Yeah? Okay. And then people go the opposite way and they go for index funds, which is just like the NZX or the SP 500 or all of these things that are just acronyms that sound like gibberish.
But they they are just a big group of companies that have a certain criteria and then you just follow that. And you when the market goes up, your money goes up, and when the market goes down, your money goes down, but nobody's actively managing it and adjusting it per se. So there is no real human behind it. It's like it's a very hands-off approach. It's like there's set criteria, but then we often misunderstand those criteria. Like the SP 500 is meant to be the 500 biggest companies in the US, but there's actually a few more criteria that people have to meet. So there might be companies that you think would be in there and they're actually not. So there's a bit of a like misunderstanding of what index funds are. And then there's the aspect that it is then hands-off approach, and it's not being adjusted with what's going on in the world or for you specifically or whatever.
SPEAKER_00
Okay. And can you just explain to me? When I think when I was younger and I was thinking about investment and you know, shares, I would often think of the Wall Street and the craziness of the Wall Street, and you've got all those different people yelling in a big room. Yeah, exactly. People yelling, the phones are ringing. Like what happens in there?
unknown
Yes.
SPEAKER_00
And how can you reconnect that to the two profiles that you've just explained?
SPEAKER_01
So, one, I'm not sure that the reality of it is quite what we see on like Wolf and Wall Street. And then also that's more, I guess, the the behind the scenes where companies are wanting to buy and sell, and you've got these brokers,
stock brokers, buying and selling, but your index fund is just kind of tootling along. People are buying, still, people are buying and selling shares in it, though. You know, so that's what's going on there. People are constantly buying and selling shares in businesses, which is why the price fluctuates constantly, and then you aggregate that, you group that all together, and you get these volatilities within the funds and stuff. But it's that madness doesn't translate into the index fund. And I think that's why people have moved towards index funds, is that they are like the quite low cost, like the fees are low because it's hands-off, and then there's
this idea that it is just like a safe harbor in the context of investing. I'm not trying to pick stocks, I'm just going with these have been chosen and rising tide floats or boats. Yeah. So as the market goes up, I'll go up and I don't need to worry about it. A little bit of a set and forget mentality, a bit like what people often have with KiwiSaver, even though they maybe shouldn't, is well, I've got it there and the money's going in. And so I'll check on that in like 10 years' time. And then in the middle, the space that I kind of live in is these managed funds, which are, they might include parts of the index, but they
won't be just shares. So both things we've talked about are, generally speaking, entirely the share market, which then has higher risk, whereas the managed funds I work in have different levels of share market exposure, depends if it's a conservative fund or a high growth fund. And then they also have a bit of property exposure. They will have some bonds and term deposits and cash. And so it's much more customizable to what is your kind of goal time frame and risk tolerance. And that means that you can actually use that to achieve a goal. Whereas with the direct shares, we're trying to like take a punt or learn about investing. And with the index funds, it's set and forget. And I know that eventually there'll be more money there because the stock market always does go up in the end. But managed funds is in seven years' time, I want this amount of money for this thing. So I'm going to choose a managed fund that will help me reach that goal.
SPEAKER_00
Okay.
SPEAKER_01
Yeah. And that's where they tend to be more actively managed. And plus, you often have an advisor that helps you choose and make sure it stays the correct one.
unknown
Yeah.
SPEAKER_00
And see, I love that point because I think a lot of people, for instance, that come to me, you know, they can go direct to the bank or they can ask ChatGPT, and ChatGPT will tell them what to do. Not often correct. But, you know, they come to me because they want to talk to a human. They want to talk to a human when they're stressed, when they want to put an offer on a house, or, you know, when something big happens in their life. And I feel like with managed funds, it's a similar situation where people need another human connection.
unknown
Yeah.
SPEAKER_00
Because as you say, you know, yes, you can go and buy the shares on your own. You can go and, you know,
open up a shares account with the bank back in the day. I remember we had this share trading accounts with ASB, you know, that you could just open up and start buying shares, et cetera, et cetera. So having those platforms made it much easier for people to go and buy shares, but then you're not talking to a real human and setting those goals up that, hey, in seven years' time, I want to make sure I have $50,000 for my kids' education because I don't want them to suffer through college or whatever. So it's awesome that it now becomes a little bit more popular and accessible because I guess again, the misconception about the investment advisors back in the day is that you guys are very expensive, you know, and only rich people can come to you.
SPEAKER_01
Yeah. And that's definitely what I thought when I was in my 20s, is I I thought that financial advisors were for people that were already rich and I didn't realize how they worked. So it is fantastic that, you know, I have a range of services so it can meet different people where they are. And then also we can start people with small amounts and they can incrementally build up. And it can be much more of like a this is how you build for the future. This is how you build the life that you want by having an expert that's going to help you to set up your mortgage correctly, and an expert that's going to help you build wealth and an expert that's going to help you protect all of those things. And together it's kind of, especially if you have people working together across those spaces, which is happening more in our industry, I think, that collaboration. Then you end up with this team of people that are helping you succeed. And all you have to do is kind of have the the dream of what you want and give, you know, give that information to the advisors, and then they can build you a plan. And then we've got all of these tools at our disposal that can help us help the clients achieve that goal.
SPEAKER_00
That's awesome. Thank you so much. All right, quick recap. We've just talked about three different ways you can do your investment. Yes. You can go through shares. Yeah. Direct shares. Direct shares. Then we've got
indexed shares. Indexed funds, yeah. And then we've got the managed one. Yes. Yeah. Perfect. I got this right. You did it, yeah. Yes. Awesome guys. Well, if you've missed out, Elizabeth and I recorded a few episodes about investing and stuff. And the latest one we've done was about how much money do you need to start investing. So go and listen to this one and come back to us if you've got any questions. Thank you so much.
