How Kernel is making investing accessible and the case for getting started
The world of finance can be intimidating for first-time investors and people often worry about getting it wrong. After all, the potential for loss is uncomfortable and what if the next crash is around the corner? Kernel founder and chief executive Dean Anderson says that when it comes to growing your wealth, you’re best to just get started. Choosing an investment option that is accessible and low-effort can also be the best strategy.
“The financial services industry has made investing seem far more complex than it is,” Anderson says. “As for deciding when to invest, whilst many people try to convince you they can predict the future, it’s time in the market not timing the market that gives the best results”.
Index investing is where investors seek to match the performance of a market index, like the S&P 500 or the S&P/NZX 20 index. The index sets the rules of which investments an index fund manager (Kernel) can include in the fund. These funds can cover any asset class – shares, bonds, property and more. An index fund then mirrors the performance of an index, so that as the value of the index rises, your fund does too.
Because there’s no portfolio manager picking the stocks in your index fund, index investors can expect to pay much lower fees than for actively managed funds. Kernel charges a 0.39 percent investment management fee for each of its index funds (0.29 percent if investing over $25,000), plus a $3 monthly member fee – by comparison, that puts Kernel’s fees as one of the lowest of 144 managed funds assessed by Sorted’s Smart Investor comparison engine, and some topped 4 percent..
While it seems logical to assume that getting a good return on your investment means spending a lot of time and energy on managing the project yourself, Anderson says that when it comes to investing, counterintuitively, less intervention is better.
“Successful investing involves riding the ups and downs whilst focusing on the things you can control, likes fees and diversification. The numbers tell us that consistently investing for the long term and leaving your portfolio to do it’s thing ensures the best chance for success”.
Index funds like those offered by Kernel are becoming more popular around the world for their transparency, low fees and reliable returns. Bloomberg reported that this September, assets in U.S. index-based equity mutual funds and ETFs topped those in active stock funds for the first time in history.
“The growth in index funds has come on the back of consistent under-performance by active fund managers,” Anderson says. “Investors no longer want to pay high fees to get a below average return. As this fact has become more well known, investors are shifting out of active and into index funds.”
He says the shift has been boosted by the digitisation of the financial services sector.
“Investing is now far more accessible – you no longer need large balances to get access to sophisticated investment products.”
Kernel can help investors access content which will support them in improving their financial literacy and help them make informed decisions. Anderson says the team won’t shy away from using jargon, but will help those unfamiliar with it become more confident with their finances and investing.
Recently Kernel compared different investment approaches an investor might take when starting out to demonstrate how keeping it simple and consistent over a number of years has the best outcome.
“We encourage our investors to think about the important things; why are they investing and when they need to use this money,” Anderson says.
“Setting up an investment plan that works for you is what’s important because your goals can’t wait”.
To start investing with Kernel, visit kernelwealth.co.nz.