A sentence in a recent speech by Reserve Bank Governor Alan Bollard caught my eye. "New Zealanders invest about twice as much in equities (shares) directly compared with managed funds," he said.

There are good reasons for owning shares directly, some of which Bollard touched on. "This may reflect our DIY investment culture, also a disdain for advisers, fund managers and their fees," he said.

Still, I suspect many New Zealanders would be better off to own their shares via a fund - especially in light of the fact that, of the 30 per cent of households that own shares directly, the median value of their holding is only about $6,000.

Wise direct share investors hold lots of different shares. And if your holdings total anything less than about $50,000, preferably more, you can't be spread across many companies.

I don't want to be too critical of those who hold shares directly. At least they are in the share market. Bollard points out that New Zealanders are peculiarly uninterested in shares.

Our direct holdings of local and overseas shares make up about 4 per cent of our total assets. Australians hold about 1.5 times as much of their assets in shares, Britons about twice as much, and Americans more than four times as much, according to the Reserve Bank.

New Zealanders' lack of enthusiasm for shares, and our tendency to instead invest in property, leaves us overexposed to property downturns.

Those who own small direct share holdings, then, at least have a better spread than those with no shares at all.

But if you are planning to grow your share holdings to an appreciable portion of your long-term savings, there are some advantages in investing through a super scheme or other share fund.

It's true that the fees will reduce your returns. But you can shop around for lower fees - and that's where index share funds come into their own. Because they simply invest in all the shares in a market index, rather than researching which shares to buy and sell, their fees are considerably lower than other share funds. And their performance is often as good.

Share funds' big advantage over investing directly is that, even if you invest just a few hundred dollars, you own a small portion of a wide range of shares. If one or several of them take a thrashing, it doesn't affect you much.

Other advantages of share funds over direct share holdings are:

• You don't need to research which shares to buy or sell.
• There's less paper work - keeping track of dividends, deciding how to vote on shareholder issues and so on.
• It's easier to drip feed money into a share fund - perhaps a fixed amount every week or month.
• Under the tax changes coming into effect later this year,
  investors in the top 39 per cent tax bracket will pay tax at only 33
  per cent in share fund investments - provided the fund becomes a
  "portfolio investment entity" or PIE. Most funds are expected to become
  PIEs.
• Also under the changes, if you invest in a New Zealand or
  Australian PIE share fund, the fund won't be taxed on capital gains,
  whereas direct shareholders who trade frequently are often taxed on
  those gains.

The message is two-fold: If you have no share investments, it's a good idea to change that. And, particularly if you have less than $50,000 or $100,000 to invest, you may well be better off using a share fund than investing directly.

Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter.
Her written advice is of a general nature, and she is not responsible
for any loss that any reader may suffer from following that advice.