Think Small
When it comes to share markets and how they are faring, we generally hear about the main indices like the NZSE40, the ASX 300 or the Dow Jones Industrial Average. But some of the more interesting, often more positive news can be obscured by the big players.
One of the real success stories over the last decade has been relatively superior performance of many small companies. The way we define “small” is a little different here in New Zealand compared with larger markets. With the possible exception of Telecom, all of the companies in New Zealand’s SE40 – the index of the 40 largest companies - would be considered very small by overseas measures. But that aside, as far as the New Zealand share market is concerned, our small companies have performed very well. In fact, they have considerably out-performed their bigger brothers.
The graph below shows the relative value of $10,000 invested since June 1991 in the NZSE40 Gross and the Small Companies Gross Indices. The Smaller Companies Index covers listed companies not in the NZSE40. Think Small has definitely been the better option.
Opportunities for investing in small companies via managed funds are somewhat limited here because of the relatively small and illiquid state of the market. Direct purchases of company shares is always an option and many people enjoy keeping tabs on their direct holdings. The wider Australasian market has more opportunities.
At Capital Financial Planning Ltd we have selected a number of specialist Australasian managed funds offering exposure to smaller companies. The track records of some are enviable to say the least. If you are one of the lucky ones holding some of the JB Were Emerging Leaders Fund, for example, you will have enjoyed performance over 3,5 and 7 years in excess of 20% per annum. This fund is now closed but some worthy successors are available.
If you have over NZ$350,000 to invest and want truly impartial advice, contact us to find out how we can put your money to work to fund your important goals.
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