Are you in the right KiwiSaver fund for your circumstances?
Taking the time now to check can really pay off.
Here are some things to think about.
How are KiwiSaver funds different?
The KiwiSaver universe is made up of a range of providers, who each have their own suite of funds.
Generally, providers will offer funds that fit into risk categories such as cash, conservative, balanced, growth and aggressive.
The amount of risk that each fund takes is different. It is worth looking at the specifics of any fund you’re considering, but broadly you could expect:
Cash: A cash fund keeps all of its investments in things like cash and short-term term deposits. This means the return might not be huge but your balance in a cash fund won’t move around much. This can be a good option for people who are planning to use their KiwiSaver money for a first-home deposit sometime soon, for example, and need to know how much they have available.
Conservative: A conservative fund takes a little more risk, although they are usually still largely invested in income assets and likely to be significantly less volatile than balanced, growth or aggressive funds.
Balanced: Balanced funds invest across growth and income assets – often with a split of 60/40 to growth assets, such as shares.
Growth: Growth funds have a larger proportion of their investment exposed to shares and can be more volatile, although data shows they tend to perform better over the long term.
Aggressive: Aggressive funds take more risk again. People are often told not to put their money in an aggressive fund if they will need to use the money within 10 years of investing.
How do you choose?
Often, the right fund for you will depend on your investing time horizon.
If you have a short period of time until you need the money, you might choose to put it in a less risky fund. That’s because you don’t have time to wait for the markets to pick up again if there is a drop in value before you make your withdrawal.
When you have a longer timeframe, you can generally ride out the ups and downs of the market without worrying – and the exposure to more volatile assets can give a better return over time.
You might also need to consider your own personality. If you’re the sort of person who finds market volatility very difficult, and might panic, it could make sense to take less risk. But a better alternative could be to turn to your adviser when you’re worried, to remind you that market volatility is to be expected, and to help you stay the course.
Don’t set and forget
It’s a good idea to check on your KiwiSaver settings from time to time, to make sure they are still working for you. The choices you made when you were saving for a first home, for example, are probably not likely to be the right ones to carry you through many years of investing for retirement. As you get closer to retirement, you might need to adjust again.
We can help
If it’s time to check your KiwiSaver settings, or put a new investing strategy in place, get in touch with us. We can help you to assess your KiwiSaver options and work out which may be appropriate for you.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.