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When it comes to KiwiSaver, you can’t underestimate the importance of choosing the right investment fund. The best fund for you is based on how old you are now, when you want to withdraw your money (for retirement or first home), your attitude to risk and your personal goals. It’s not as simple as picking the shiniest button in the box! Finding yourself in the wrong investment fund could mean missing out on thousands of dollars by the time you reach your investment goal.

Thanks to a volatile 2020 (in more ways than one), around 12,700 younger KiwiSaver members switched to more conservative funds between February and April last year. Obviously, this was at the height of the pandemic in New Zealand, but most of those Kiwis are still in those same funds now, which could limit their potential for growth and might not line up with their long-term goals for saving. According to the Financial Markets Authority (FMA), 381,000 members are still in the low risk, low return fund, the default when starting a new job, simply because they haven’t made any decisions about their fund themselves.

“Fund choice can seem complicated, but the main concern is managing the risk versus the reward of a given fund,” says AdviceFirst adviser Brent Hunt. “Most funds are considered either ‘growth’ funds, which have a high level of risk and mainly invest in shares or property, ‘conservative’ funds, which have a more stable value and deal with income assets, or ‘balanced’ funds, which are exactly what they sound like. Conservative funds tend to give lower returns, but there’s less chance of bigger drops. Investing in a growth fund is a bit more of a rollercoaster, but they historically recover quicker after there’s any kind of market downturn and perform better over the longer term.”

Brent says any choices you make with regard to your KiwiSaver fund should line up with why you’re investing, and when you might want to access these savings.

“Generally speaking, if you’re a long way from retirement, you could consider investing in more growth options as your account has many years to recover from market swings associated with these types of funds. On the other hand, if you’re actively looking to buy your first home, it might be better to go with a low risk conservative option that ensures you know how much will be in the fund when you need to access it for a deposit.”

“No matter what stage you’ve reached in your life, checking that your KiwiSaver investment is in the correct fund is vital for achieving your goals.” says Brent.

For help understanding your personal risk profile and choosing an investment fund you can contact an AdviceFirst adviser on 0800 438 238 or email letstalk@advicefirst.co.nz.

AdviceFirst is a Financial Advice Provider (FSP23242).