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The NZ50 index is the benchmark index of the New Zealand Stock Exchange (NZSX), and for the New Zealand economy more broadly. It has been calculated since 2003 and tracks the performance of the top 50 stocks that trade on the NSZX.
This page will take you through a brief history of the NZ50, give information on how the stocks that comprise the index are selected, and let you know how you can invest in its performance.
The NZ50 index came into being in March 2003, at which point it was called the NZSX 50 index. At the time it was introduced, it assumed the role of New Zealand’s benchmark index, a function that had previously been filled by the NZSE 40 index.
Whereas the NZSE 40 index tracked the performance of 40 stocks listed on the New Zealand Stock Exchange, the NSZX 50 (renamed the NZ50 in 2005) follows the 50 largest stocks traded on the exchange – as measured by free-float market capitalisation.
The NZ50 index saw pretty consistent growth throughout the early 21st century, having started at a level of 1902.49 on the 7th March 2003. The notable exception to this growth was the global financial crisis of 2007-08, which saw the index fall by almost 50% to under 2,500 index points (having climbed to nearly 4,500).
The index recovered from this point gradually, but it only reached it’s pre-crash levels again in 2013. After this the NZ50 saw much more rapid growth, reaching its all-time high of 12,073.34 on 21st February 2020. This growth was then swiftly curtailed by the COVID-19 pandemic, and the NZ50 had fallen to 8,498.70 by 23rd March.
It’s uncertain exactly how the New Zealand economy will respond in the long term, but the country’s government was hailed for their handling of the virus and this is likely to pay long-term economic dividends.
The NZ50 is structured to include the top 50 stocks trading on the New Zealand Stock Exchange. The calculations rely on each company’s free-float market capitalisation, to ensure the NZ50 is following not only valuable stocks, but also commonly traded ones. Companies currently listed on the NZ50 include Australia and New Zealand Banking Group Limited, The New Zealand Refining Company Limited, and Sky Network Television Limited.
While you cannot invest in indices directly, there are a variety of tools you can use to invest in a way that follows their performance. The most common ways of investing in the NZ50 index are ETFs and mutual funds. An ETF is an ‘exchange-traded fund’ which gives you a diversified investment covering the stocks tracked by the NZ50 index, and can be traded on an exchange at any time during trading hours.
Mutual funds pool investors’ money with a fund manager directing investments to generate profits for everyone putting money into the fund. An NZ50 mutual fund (also known as an NZ50 index fund) also gives a diversified investment into the performance of the NZ50 index, but unlike ETFs mutual funds can only be bought or sold at the end of each trading day. If you’re looking to trade rather than buy and hold for the long term, it’s generally better to use an ETF.
The other option you have when investing in indices is simply to buy stock in all the companies that the index tracks. The issue with this method is that it can be expensive and time-consuming, as you’ll need to carry out 50 different transactions to buy all the stocks listed in the NZ50.