4 Investment Ideas For When You’ve Paid Off Your Mortgage

So, you’ve finally paid off your mortgage and the last thing you want to do is invest in another property. Rest assured, there is more to investing than just real estate. Here’s 4 investment ideas for when you’ve paid off your mortgage:

1) Listed Shares

Buying a share is like buying a small part of a company and a small part of the returns that business makes.

Returns from shares come in the form of dividends (a share of the profit the business makes) and capital gains (when you sell a share for more than what you paid for it).

Investing in shares sounds obvious – 1 in 5 Kiwis have a direct investment in them.[1] When thinking about investing in shares, it’s easy to think only of NZX and the companies listed there. There does however exist other stock exchanges and platforms that you could invest in for financial gain.

Take for example the Unlisted Securities Exchange (USX). USX is an alternative to the NZX, as the later generally lists larger, more mature companies that can afford the additional compliance costs. Predominantly, USX provides a financial product market for companies that are not of a scale to justify the additional compliance costs or due to constitutional limitations are not able to list on the NZX. The USX is often seen as a stepping stone market for SME’s (small to medium enterprises). Therefore, trading shares on platforms like USX can provide an investor with better access to SME investment opportunities and allow them to better diversify their portfolio.

If you’re interested in investing in companies on the USX, go to www.usx.co.nz

2) Equity Crowdfunding

Equity crowdfunding is when the “crowd” (anyone related to the particular business) invest in those businesses in exchange for shares. These businesses are usually small to medium in size, often in early stages of growth, and usually not listed on a financial product market. In New Zealand, there are a number of licensed crowdfunding platforms (e.g. Crowdsphere, Snowball Effect etc.).

Equity crowdfunding is growing in popularity as an investment opportunity and can provide unique benefits to the investor. As part of a crowd of investors in a business, you often have a personal interest and alignment of values with the business. The equity crowdfunding platforms are digital with online access and provide access to a range of businesses not otherwise accessible under the legislation. These platforms are available to everyone, meaning both experienced and novice investors can get skin in the game. Furthermore, equity crowdfunding gives investors access to private, unlisted businesses.

Equity crowdfunding platforms are licenced by the FMA and undertake varying levels of due diligence on the investee companies and their offerings.

For more information on equity crowdfunding see What Is Equity Crowdfunding?
If you’re interested in investing in equity crowdfunding, get in touch!

3) Become an Angel Investor

Do you have a family member or friend that’s starting up an exciting venture or business? Invest in them and become an angel investor!

An angel investor is anyone willing to invest in entrepreneurs and start-up businesses. They typically contribute anywhere between $10,000 – $500,000 and often stick with the business until it is either bought out or sold.

Because of the high level of risk incurred, angel investors look for a high return, invest across a range of companies and understand that a number may fail or provide no return.

Becoming an angel investor can be as simple as investing a large sum of money into a venture belonging to someone you know. You can also join an Angel Network like Ice Angels or network with business incubators (e.g. Lightning Lab) and investment banks to find opportunities you like.

Armillary Private Capital advise a number of early stage businesses across a wide range of industries including technology, blockchain and fintech.

For more information on angel investing see Angel Investors… Venture Capitalists.. What does it all mean?

If you’re interested in investing in SME’s, get in touch!

4) Invest in Private Companies

This is an alternative investment category that many investors are unaware of or find hard to access. There are a significant number of private companies in New Zealand making up nearly two-thirds of our economic output[2].

Many advantages come with investing in private businesses. For example, having ownership in a private firm can be cheaper than a public one. Investors with ownership in a private company also share in the business’ underlying profits.

Investors with a large ownership stake in the business often get a seat at the board table. That way they can provide guidance and be more influential in the decision-making process of the firm.

Investing in private companies usually means the investor gets either equity or debt in return as security. It is important to keep in mind that this type of investment is less liquid and may require a long-term investment timeframe.

Investors can invest in private businesses at different stages of the business’ lifecycle. There are currently a wide range of private businesses in many different industries that an investor can choose to invest in. Start-ups in general can be a riskier investment compared to mature, established firms. What investors look for is a sound structure, the quality of management and market demand.

If you’re interested in investing in private businesses, get in touch!

[1] https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=12080238

[2] http://www.kpmgenterprise.co.nz/Learning-Centre/10/Why-private-business-is-key-to-New-Zealands-prosperity