ETFs can be a "smart" way to build a long-term, diverse portfolio.
Amid a “rocky” economic outlook in 2025, investors may be wondering how best to navigate potential market swings and maintain steady returns.
Anna Scott, Chief Executive of New Zealand fund manager Smart, says it is easy for people to panic when they hear headlines such as market plunges to record lows.
“There are many examples of market events that have caused just such selling,” she says. “New Zealand is not immune to global economic or financial impacts and globally 2025 is looking like it is going to be a rocky year which will only heighten anxiety among investors.”
Scott says given this uncertainty, Smart’s ETFs (exchange traded funds) are particularly useful as they offer a “smart way for investors to access diversified exposure to markets both internationally and locally”, thus helping smooth out the ups and downs of a volatile market.
An ETF holds a collection of assets like stocks, bonds or commodities. When investors purchase an ETF, they are essentially buying a small share of all the investments in that fund.
Smart works in collaboration with global investment manager BlackRock through its iShares arm and Scott was speaking following the release of a BlackRock Investment Institute report which says the uncertainty around global tariffs could hurt growth, add to inflation and lead to a reassessment of supply chains.
“In markets, we think US equities could come under pressure in the next few months as investors seek additional compensation for these risks… (although) more resilient economic growth, solid corporate earnings, potential deregulation and the AI megaforce keep us positive on a six-to-12-month tactical view,” the report says.
Smart launched four new ETFs late last year, providing Kiwis with a flexible way to invest across various companies, industries, and sectors—allowing investors to spread risk and diversify investments within their portfolios.
As Scott previously told BusinessDesk, a good analogy for choosing to invest with an ETF is that it’s like shopping in one place rather than having to visit lots of individual stores.
“Investing directly in shares is like looking for a needle in a haystack. Smart ETFs remove the need to find the needle. We provide a number of ways for investors to ‘buy the haystack’ through market-tracking products that allow you to invest all over the world.”
The four new Smart ETFs provide exposure to gold, bitcoin, the top 20 NZX-listed companies and US technology which tracks an index of US IT sector companies. Scott says volatility moves like waves in the ocean – some rise, some fall, and instead of trying to predict each wave, a smart approach is to take a small slice of each. By staying invested through the ups and downs, investors can smooth out market swings, and over time, are more likely to see steady returns.
“Trying to predict the best time to buy or sell can be counterproductive as markets are in perpetual motion, moving up and down. We believe a smart way to build wealth is through regular, long-term investments.”
Scott believes part of the reason investors are prone to sell in market lows is because of a lack of education or knowledge around investing. “We don’t teach money in schools and I don’t think we are necessarily learning it at home either.
“The tools are there but are coming from widespread sources. As a result, people can be overwhelmed by information or don’t know who to trust. I would like to see the subject taught in schools – I think there would be huge power in centralising it into our curriculum.”
Scott says compared to actively managed funds, ETFs typically have lower fees which can help preserve returns in volatile markets. They are also easy to access and sell because, unlike managed funds, they trade on the stock exchange.
In times of volatility, investors can opt for NZD-hedged ETFs, which help reduce the impact of currency fluctuations.
Scott advises people to know their investment goals: “Figure out what you are saving for, and establish your timeframe and risk tolerance.” With the four new ETFs, Smart now has 44 ETFs on offer, which means investors can use a “core and niche” approach establishing solid investment building blocks for the majority of a portfolio, while also venturing into niche markets based on preference or personal views. But, Scott says, all investments involve risk. “Purchasing Smart ETFs does not guarantee a profit and the value of your investments can go down as well as up based on the underlying investments of the ETF.” Smart is a wholly-owned subsidiary of NZX Ltd and has more than $13 billion in funds under management. Its ETFs are listed in NZD as Portfolio Investment Entities (PIEs) which are taxed at a rate of 28%, removing the complexity and costs of managing foreign currencies or overseas tax.
For information on Smart ETFs go to: Learn more about Smart ETFs | The wise invest Smart
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