Advanced Investment Strategies
Take your investing to the next level with sophisticated strategies and techniques
Prerequisites: These strategies assume you understand basic investing, have a diversified portfolio, and are comfortable with higher complexity and risk.
Value Averaging
Value averaging is a more sophisticated alternative to dollar-cost averaging. Instead of investing a fixed amount regularly, you adjust your contribution to meet a target portfolio value growth rate.
How It Works
Target: Portfolio grows by $1,000/month
Month 1
Target: $1,000
Current: $0
Invest: $1,000
Month 2
Target: $2,000
Current: $900 (market down)
Invest: $1,100
Month 3
Target: $3,000
Current: $2,200 (market up)
Invest: $800
Month 4
Target: $4,000
Current: $4,100 (market up)
Sell: $100
Advantages
- • Forces buy low, sell high
- • Better returns than DCA in volatile markets
- • Systematic rebalancing
Disadvantages
- • Requires more capital in down markets
- • More complex to implement
- • May trigger more taxes
Tax Loss Harvesting
Tax loss harvesting involves selling investments at a loss to offset capital gains taxes. In New Zealand, this is less relevant for most investors but can apply to property and international shares under certain conditions.
NZ-Specific Considerations
- • No capital gains tax for long-term investors
- • FIF rules may create taxable income regardless
- • Property bright-line test creates taxable gains
- • Trading frequency affects tax treatment
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Core-Satellite Portfolio Strategy
Combine passive index investing (core) with active investments (satellites) to balance low costs with the potential for outperformance.
Core Holdings (70-90%)
Low-cost, diversified index funds providing market returns
- Total market index funds
- International index funds
- Bond index funds
Satellites (10-30%)
Higher-risk, higher-reward investments
- Sector funds
- Individual stocks
- Thematic ETFs
Example: Conservative
- • 90% Core: Global index funds
- • 5% Satellite: NZ dividend stocks
- • 5% Satellite: Gold ETF
Example: Aggressive
- • 70% Core: Stock index funds
- • 15% Satellite: Tech stocks
- • 15% Satellite: Emerging markets
Leverage and Margin Investing
High Risk Warning: Leverage amplifies both gains and losses. You can lose more than your initial investment. Only for experienced investors.
Leverage means borrowing money to invest, multiplying both potential returns and risks. Common forms include margin loans, investment property mortgages, and leveraged ETFs.
Leverage Calculator
Factor Investing / Smart Beta
Factor investing targets specific drivers of returns beyond market cap weighting. Academic research has identified factors that historically outperform the market.
Value Factor
Cheap stocks outperform expensive ones
Momentum Factor
Recent winners keep winning
Quality Factor
Profitable, stable companies outperform
Size Factor
Small caps outperform large caps (with more risk)
Multi-Factor Approach
Combining factors can improve risk-adjusted returns. Many smart beta ETFs target multiple factors simultaneously (e.g., value + quality).
Options Strategies (Limited in NZ)
NZ Limitation: Options trading is limited in New Zealand. Most NZ brokers don't offer options, and you'll need an international broker for access.
Options are contracts giving you the right (but not obligation) to buy or sell at a specific price. They can be used for income, hedging, or speculation.
Covered Calls (Income)
Sell call options on stocks you own to generate income.
Protective Puts (Insurance)
Buy put options to protect against downside risk.
Before Using Advanced Strategies
Remember: Simple, low-cost index investing beats most advanced strategies after costs and taxes.
Review Risk ManagementStrategy Complexity
Beginner-Friendly
- Core-Satellite
- Value Averaging
Intermediate
- Factor Investing
- Tax Loss Harvesting
Advanced
- Leverage/Margin
- Options Trading
Remember
Advanced doesn't mean better. Most investors achieve their goals with simple, low-cost index funds. Only add complexity if it truly improves your situation.