This year Money Week (5 – 11 September) is focused on helping New Zealanders make a plan for their future.
If you nurture your seedlings as they grow, you are more likely to be rewarded with a healthy blooming tree later. Similarly with KiwiSaver, it’s good to understand the different funds and how they can help your retirement savings grow. KiwiSaver funds are different from your everyday bank accounts. Because they invest in different types of assets, your KiwiSaver balance can move up and down over time.
If you’re still getting started with understanding the features of KiwiSaver, check out our previous blog post.
What makes one fund different from another?
There are different types of funds to suit different types of investors.
What makes funds different is the different mix of assets they invest in. There are two main types of assets:
The ASB KiwiSaver Scheme has five funds you can choose from. Each fund invests in a different proportion of income assets and growth assets. A fund with more growth assets has higher investment risk (more ups and downs) and higher potential return; a fund with more income assets has lower investment risk and lower potential return.
Choosing a fund
To help choose the right fund for you, think about how much risk you’re comfortable with, what your goals are and how long you’ve got to invest.
As a general rule – the longer you’ve got until you want to access your savings, the more investment risk you can take. If you’ve got a longer investment timeframe, you’ve got more time to recover any losses. When taking greater risk, there is more potential for greater returns. Use our help me choose tool to choose a fund that may suit you.
Some examples
Ngaire and Pete are in their early 30s and have just withdrawn their KiwiSaver savings and bought their first home. Because it’s unlikely they’ll be able to access their KiwiSaver savings until retirement, Ngaire and Pete have decided the Growth Fund is the right place for their money. They feel comfortable taking a long-term view and have both made a commitment to riding out the ups and downs of the market without needing to exit the fund.
James (age 62) is going to retire at 65; he’s going to keep his savings invested with KiwiSaver and top up his NZ Super with a regular withdrawal from his KiwiSaver savings. His priority is to protect his savings from the bigger ups and downs associated with higher risk funds. James has chosen to keep his money in the Conservative Fund because of its lower risk profile.
What next?
Remember that making sure you’re in the right fund for your situation is one of the biggest differences you can make to your KiwiSaver account. Read about the different funds or use our help me choose tool to choose a fund that may suit your investment timeframe. If you are a member of the ASB KiwiSaver Scheme you can change your fund online using FastNet Classic, ASB’s internet banking service.
Interests in the ASB KiwiSaver Scheme (Scheme) are issued by ASB Group Investments Limited, a wholly owned subsidiary of ASB Bank Limited (ASB). ASB provides Scheme administration and distribution services. No person guarantees interests in the Scheme. Interests in the Scheme are not deposits or other liabilities of ASB. They are subject to investment risk, including possible loss of income and principal invested. For more information see the ASB KiwiSaver Scheme Product Disclosure Statement available from this website and the register of offers of financial products at www.business.govt.nz/disclose (search for ASB KiwiSaver Scheme).