Your fund choice matters
The investment option you choose shapes the ride as much as the destination. Some options are steadier. Others move around more. Those ups and downs can feel uncomfortable in the short term, but they've historically come with greater potential for long-term growth.
Choosing the right fund for you starts with understanding the main fund types.
Types of diversified funds
Diversified funds generally fall into five categories, based on how likely they react to market ups and down and what they invest in.
Defensive
Lowest risk
Aims to preserve capital over long-term growth. Suits people with a short investment timeframe who prefer minimal ups and downs.
Conservative
Lower risk
Designed to have fewer ups and downs, with less opportunity for long-term growth. Suits people who expect to use their KiwiSaver savings sooner or who prefer a steadier ride.
Balanced
Medium risk
A balance between growth potential and stability. Expect some ups and downs, but generally less than a growth option. Suits people who want a mix of both.
Growth
Higher risk
More ups and downs in the short term, with more opportunity for long-term growth. Suits people with a longer timeframe before they expect to use their KiwiSaver savings.
Aggressive
Highest risk
Likely to experience the biggest ups and downs along the way, but with the greatest opportunity for long-term growth. Suits people with a long timeframe and a high tolerance for market movements.
Funds with more growth assets, like shares and property, tend to move up and down more but have greater potential for long-term growth. Funds with more income assets, like cash and bonds, are generally steadier.
Choosing the right fund
If there were a perfect investment option, everyone would be in it. The reality is simpler: the right choice depends on your plans.
Your timeframe
If you're years away from using your KiwiSaver savings, time can do a lot of the heavy lifting.
Market drops tend to matter less when you've got years for your investments to recover and keep growing.
Your comfort with market ups and downs
Your timeframe matters, but so does how you feel about market ups and downs.
If your KiwiSaver balance dropped noticeably, are you comfortable staying invested and giving it time to recover and grow? Or do you need it to be steadier?
