For many New Zealanders, KiwiSaver will be the most important investment product they contribute to. According to Kiwi Wealth, the beginning of 2019 is the perfect time to take another look at clients’ KiwiSaver funds, and to ensure that they are doing everything to get the most out of the scheme.
According to Joe Bishop, Kiwi Wealth general manager customer, product and innovation, KiwiSavers need to take five key things into account when looking at their product – fund type, contribution rate, performance, retirement goals and diversification.
He says switching out of default funds is important with long-term goals in mind, and that default funds are “definitely not where you want to be in the long term.”
“As a general rule, younger KiwiSaver members should opt for growth funds, while those closer to retirement age might look to manage risk or volatility with more conservative options,” Bishop said.
“Given [default funds] are low risk, returns are – generally – commensurately lower than most other funds. Over time, that can equate to a lot of money an investor might miss out on having come retirement.”
Bishop says keeping your contribution in line with your salary is also important, as is keeping cool through any potential market downturns.
“Lifting how much you’re regularly investing can have a compounding effect,” he stated. “If you’re able to lift contributions without causing hardship, it’s an effective way to reach a goal faster.
“Ups and downs in the market can also represent opportunities, so staying the course may deliver rewards in the long term. What’s most important is to not panic or make rash decisions. Investment managers are always looking to balance risk and maximise returns given the conditions.”
Finally, Bishop says looking at global market opportunities may also be a good way to cushion against a domestic market crash, and looking at where your KiwiSaver invests its funds is a good way to assess your preferred approach.
“Your house, your job, your bank deposits – these are already tied up in New Zealand-based investments, so considering where your KiwiSaver account is invested is important,” Bishop explained. “Having it invested in international shares can provide some protection against major shocks to the domestic economy.
“This means you’re able to reduce risk by limiting investment exposure to a single market, as well as taking advantage of the opportunities available in massive global markets. For example, the New Zealand sharemarket represents just 0.2% of total OECD capitalisation.
“There’s a whole world of opportunities out there and that’s what investors should want their KiwiSaver scheme provider looking out for, as well as those closer to home.”