23 Jul 2012

Get advice, newbie investors in state assets told

11:24 pm on 23 July 2012

Financial advisers say first-time investors should get advice before buying shares in the first of four state-owned energy companies to be put up for sale.

The Government has set up a syndicate of banks and brokers to market the shares to ordinary investors, to achieve its goal of keeping at least 85% of the shares in New Zealand ownership.

Financial writer Martin Hawes says whether Mighty River Power is a good investment depends on who the investor is.

The Government has pitched the minimum package of Mighty River shares at $1000 to make it affordable for so-called mum and dad investors.

But Mr Hawes says anyone with a mortgage would be better off reducing debt levels rather than dabbling in the share market.

He says the next important consideration is the price, and that won't be known until the prospectus for Mighty River Power is released.

No 'instant profits'

A director of the Shareholders Association, Alan Best, says a diversified share portfolio will generally out-perform other investments, including property.

But he says investors can't expect to make profits straight away.

The Institute of Financial Advisers is warning would-be investors to get individual financial advice first.

President Nigel Tate says it's a great opportunity, but people should pay off debt before buying shares.

He says furthermore, buying shares in just one company is risky, and investors should opt for a diversified portfolio.