Simple Investment Choices

You’ve built your cash cushion, handled expensive debt, and opened the right accounts. Now: what do you actually buy inside those accounts?

The answer is simpler than the financial industry wants you to believe.

The Core Idea: Index Funds

An index fund is a fund that owns a little bit of everything in a market index. Instead of trying to pick winning shares, you just own the whole market.

Why this works:

• Most professional fund managers fail to beat a simple index fund after fees. In Australia, 89% of Australian Equity General funds trailed the S&P/ASX 200 over 15 years (to 30 Jun 2026)
• You don’t need to research individual companies, time the market, or make trading decisions

Some widely used index funds, with their yearly fees:

US-Listed Index Funds

Many Australian and NZ brokers let you buy US-listed ETFs, which are among the cheapest funds in the world:

• VT (Vanguard Total World Stock ETF): shares across the whole world, 0.06% (as at 27 Feb 2026)
• VTI (Vanguard Total Stock Market ETF): the whole US share market, 0.03% (as at 28 Apr 2026)
• VXUS (Vanguard Total International Stock ETF): shares outside the US, 0.05% (as at 27 Feb 2026)
• BND (Vanguard Total Bond Market ETF): US bonds, 0.03% (as at 28 Apr 2026)

The low fee isn’t the whole cost:

• Currency: you buy and get dividends in US dollars, so you pay to convert, and your returns move with the exchange rate.
• US tax forms: your broker will ask you to fill in a W-8BEN form, so US tax on your dividends is withheld at the lower treaty rate.
• US estate tax: if you aren’t a US citizen or resident, your estate must file a US estate tax return when your US assets are worth over US$60,000 (as at Oct 2026) at your death (IRS).
• New Zealand: above $50,000 (as at Oct 2026) of overseas shares, the FIF rules apply (see Investment Accounts).

A fund listed on the ASX or NZX that holds the same shares avoids most of this.

Fees: The Silent Wealth Destroyer

Every fund charges a management fee — a yearly percentage of your balance, taken out of your returns. The difference between a cheap fund and an expensive one is enormous over time.

Fund type	Example fees (as at Oct 2026)
Broad index ETF (e.g. IOZ, VAS, VAF, VGS)	0.05-0.18%
Diversified all-in-one fund (e.g. DHHF, Simplicity Growth, VDHG)	0.19-0.27%
Actively managed fund	often several times higher

See the Impact

Fee Impact Calculator

Starting amount Annual return (%) Years Low fee (%) High fee (%)

Low fee (0.03%) final

$997,914

High fee (0.75%) final

$816,430

Lost to fees

$181,484

The rule: aim for total fees below about 0.40% a year. Many index funds in both countries charge much less (see the examples above, as at Oct 2026).

ETF vs Managed Fund

	ETF	Index managed fund
How you buy	Like a share on the ASX or NZX, any time the market is open	Once per day at the fund’s price
Minimum investment	Price of 1 unit	Varies by provider
Automatic investing	Harder to automate (some brokers offer it)	Easy recurring purchases

Bottom line: The differences are minor. Don’t let this decision slow you down.

Why International Diversification Matters

Australia’s share market is only about 1.6% of the world’s (end of 2023, according to ASIC). New Zealand’s is smaller still. Investing only at home means betting your whole future on a small slice of the world economy, and on the same economy your job depends on.

A global fund owns thousands of companies across the world in a single purchase.

The Missing Piece: Bonds

Broad share index funds are 100% shares. For many investors — especially those within 10-15 years of needing the money — that’s too aggressive.

Bonds are loans you make to governments or corporations. They pay interest and are generally less volatile than shares.

A common rule of thumb: your bond allocation ≈ your age minus 10 (so a 40-year-old holds ~30% bonds).

Build Your Allocation

Portfolio Builder

Your age 30 years old Risk tolerance Moderate

Shares (global, including your home market) 80%

Bonds 20%

Based on the "110 minus age" rule, adjusted for risk tolerance. See the fund examples below for low-cost ways to hold each part in Australia or New Zealand.

Simple Portfolio Options

From simplest to slightly more hands-on:

Option 1: Your Super or KiwiSaver Default (Simplest)

Your retirement money is already invested. In Australia, if you don’t choose, your super goes into the fund’s MySuper option, which may be a lifecycle option (Moneysmart): more growth assets while you’re young, moving to safer assets as retirement nears. In New Zealand, check which fund type your KiwiSaver is in and whether it suits how long you have until 65.

• You do: Check the option, check the fees, and keep contributing.

Option 2: One Diversified Fund

A single fund holding shares (and sometimes bonds) across your home market and the world, rebalanced for you.

This is the 85% Solution in its purest form: buy it, contribute regularly, and leave it alone.

Option 3: Shares Plus Bonds

Global shares plus a bond fund, in whatever ratio matches your age.

Option 4: Three-Fund Portfolio

The classic Bogleheads three-fund portfolio: home shares, international shares and bonds.

See Your Money Grow

Compounding Calculator

Starting amount Monthly contribution Annual return (%) Years 30 years

Total contributed

$190,000

Growth from returns

$614,902

Final balance

$804,902

Rebalancing basics expand