This week, we kōrero with Wellington Mayor Justin Lester about his first investment, the wonders of compound interest, and his best piece of investing advice!
Why did you start investing?
From a young age, I've been interested in financial literacy. I got my first part-time job at 11. We didn’t have much money as a family, so earning $40 a week was a revelation to me. It was a great first insight into personal financial freedom.
Tell us about your first investment!
My first investment was buying a mountain-bike. I did this so I could increase the number of paper-run rounds I could deliver before school. I bought an Avanti Montari, which meant I could deliver two rounds six days a week, instead of one. Therefore, doubling my income.
This experience heightened my entrepreneurialism, and from there I undertook other business initiatives—like putting classifieds in the newspaper to hold garage sales at home. I made income from selling our old clothes, toys and bric-a-brac (this was before Trade Me existed!).
I put savings into a unit trust because they had higher returns than a bank account, and then bought my first shares in 1999 when Contact Energy was publicly listed. There was significant publicity around the Contact Energy listing, which made the investment process relatively straightforward. I could see it was a long-term investment in a strong infrastructure asset with good dividend returns, so I held the stock for a number of years. That experience gave me insights into share market investing, which I continued to do. I focused on New Zealand companies because I could get information about them more easily, and I understood their business activities.
What would you do differently, if anything?
The only thing I wish I’d known earlier is the power of compound interest and how important ‘length of time’ is. The earlier you start, the better.
What do you like about having an investment?
Financial literacy is incredibly important for people and families to have financial security. Our family grew up with little income and it restricted the opportunities we had to fully participate in society. This is an issue facing many families nowadays.
Investing wisely, even if it’s only a small amount, can make a big difference over time.
How did you feel after becoming an investor for the first time?
I felt a sense of being able to determine my own financial future—it was incredibly empowering. I realised I wasn’t constrained by current circumstances and could alter them, by making wise investment decisions for me, my immediate family, and my extended families. It also helped me to buy a home for my mum and brother, which they couldn’t afford for themselves.
Has investing helped you get to where you are today? If so, how?
Investing early helped me to build the savings to invest and grow my own business. I set up Ka Pai with a friend and we grew it over 12 years. It gave us greater financial flexibility and freedom, as well as the reward of running one’s own business. It also helped me get a deposit for my own home, and then pay off the mortgage.
People often think you need loads of money to invest. What tips would you give to everyday people who might not think it’s possible?
You can start early with small amounts—such as $5 or $10 a week. The power of compound interest over time means this will grow enormously over a period of 10-20 years.
If you don’t want to do it yourself, joining KiwiSaver or an investment fund is really simple. It's probably one of the best financial decisions that you can make.
What is the best piece of advice you’ve given (or been given) about investing?
Two pieces of advice:
Start saving or investing early, even if it’s a small amount—the power of compound interest over time is mind-blowing.
Make it happen—because there’s no time like the present. You’re better to start today and take a long-term view, than to wait until it’s too late and you don’t have money for a home or your retirement.