Ditching property for shares? Why Kiwi investors could be swapping one dangerous investment mistake for another

Sunday, 14 June 2026

Research found that advice from friends and colleagues is cited as an important source of information for 85% of investors under the age of 35, and 61% of these investors also said they were using social media as a source for investment information.

Traumatised by the 2006 finance company collapses, Kiwi investors poured heavily into property, assuming it was safe.

Now fleeing a cooling property market, many are over-exposing themselves to highly concentrated, AI-heavy US index funds.

Experts warn that swapping one single asset class for another isn't safety – it’s the same mistake repeated.

ANALYSIS: In 2007, retiree Ken Mitchell lost $1.1 million of his life savings after investing in Bridgecorp and Hanover Finance.

His story typified the enormous damage done to New Zealand wealth when 60 finance companies collapsed between 2006 and 2012. The collapse scarred an entire generation, driving them away from paper assets and into something they could touch and feel: property.

From 2010 to 2021, New Zealand’s property values more than doubled from a median price of $350,000 to $895,000 as Kiwis poured money into an asset class that seemed safe and impervious to a collapse.

Plummeting interest rates, supply shortages, and tax incentives all combined to drive New Zealand wealth into a single asset class. Today, this means that more than 57% of New Zealand’s household wealth is tied up in land and property – one of the highest rates in the OECD.

But as is the case in most markets, the good times did not last forever. Following the peak in 2021, property prices dropped 15% to 18%, and even more in some regions. When you factor in the compounding impact of inflation running hot, you’re looking at a decline of more than 30%.

Families who bought at that peak have paid a big price for buying into an investment that looked so safe and stable from the outside.

The big investment mistake

Katie Wesney, the national coaching lead at Enable Me, notes that the impact of a downward turn in property can hit particularly hard because people often invest more than they currently have by taking on debt.

Katie Wesney is the national coaching lead at Enable Me.

“I regularly see people leveraged to the eyeballs across multiple properties, often in the same region,” she says.

“They feel wealthy on paper, but you can’t eat an investment property, and in a downturn or after a major weather event, that illiquidity can bite hard. New Zealand’s exposure to extreme weather makes geographic concentration a real and under-appreciated risk.”

The problem here, says Wesney, isn’t that these people invested in property. It’s that they’re investing in property at the expense of anything else – and this problem can also apply to other investment classes.

In much the same way that Kiwis turned away from finance companies to property, they are now shifting more of their funds from property investment into index or investment funds.

“I’m seeing a new extreme emerge,” says Wesney.

“People who’ve moved entirely out of property and carry no debt now hold everything with a single provider in an aggressive fund they haven’t revisited in years. Different concentration, same problem.”

The index fund promise

Robyn Conway, the general manager of managed funds at Fisher Funds, tells me there’s a growing cohort of New Zealanders relying on index funds to grow their wealth over the long term.

This can be a good strategy, says Conway, but it’s important to realise there are still risks involved.

Indeed, when you invest in an index fund like the S&P 500, investment platform Sharesies gives it a high risk ranking of 6 or 7 – a reality easily overlooked during a boom.

Robyn Conway warns diversification comes down to more than moving money from one investment to another.

'At the moment, in particular, index funds are far less diversified than what most people probably realise,” says Conway.

“The top 10 companies represent between 35 and 40% of the total index weight, and a large number of those are heavily invested in AI.”

If the AI hype bubble does indeed burst, as some high-profile investors suggest it will, then these indices will be hit hard.

True diversification, Conway explains, isn’t just about swapping one asset class (say property) for another (US-based index funds), but rather a case of diversifying across asset classes, geographies, and styles.

Wesney agrees with this sentiment, saying: “The people who get this right aren’t necessarily the ones with the most assets. They’re the ones who can answer this question: if one thing goes wrong, does everything unravel? If the answer is yes, it’s time to reassess.”

Beware the bull market

It’s always easier to have a high tolerance for risk when the market is doing well or when it tends to show a proclivity for bouncing back quickly.

Since the Covid pandemic, the S&P 500 has risen 225% since bottoming out in March 2020. And every time there’s been a dip (think Trump’s Liberation Day), there’s been a remarkably fast bounce back.

The S&P 500 passed the 7,000-point milestone at the beginning of the year and recently peaked at 7,620. There seems to be no way but up – as was the case during the finance company and property booms.

However, Conway warns that it’s dangerous to assume that things will always move in this direction or that the bouncebacks will always be so painless.

History is replete with evidence to back her point. Following the dot-com crash and the 1970s stagflation cycle, it took seven painful years for the S&P 500 to recover its losses. Even the post-GFC rebound required four and a half years of patience.

For a true example of the worst-case scenario, it pays to look at the 25 years it took to recover from the Great Depression (at that time, investors had their money in the S&P 90, which tracked the 90 biggest companies in the US).

'Clients are very sure of the risk that they're prepared to take and the volatility that they're prepared to withstand when things are going well,” says Conway.

“When things start to turn, and when they turn for long periods of time, what actually starts to transpire is people's discomfort in those environments.'

This is why paying attention to the importance of diversification matters. If you have four, seven, or (God forbid) 25 years to weather the period of recovery, then that’s great. But this isn’t the case for everyone.

True diversification, says Wesney, takes account of liquidity (your ability to access cash), leverage, time horizon, and the provider you’re relying on.

These factors all change as you age, which means that diversification isn’t a ‘set and forget’ strategy. It’s something you need to revisit as your circumstances evolve.

The ultimate test of any portfolio isn't how fast it grows during a boom, but whether it survives a sudden shift in the wind.

Where are your eggs currently sitting, and is it time to look closely at your own basket? Let us know your thoughts diversification, property investment and index funds in the comments section below.