One of the key considerations when investing money is your investor profile.
Now, before you say “I’m not an investor”, ask yourself if you have funds in KiwiSaver, a Term Deposit or high-interest savings account, because that means you already are.
There are four aspects that make up your investor profile:
- How long is the piece of string – what term do you want to invest for?
- Gimme gimme gimme – are you looking for income or growth from your returns?
- Cash out or cash up – what level of liquidity do you need, might you need to access your money easily?
- Risky business – how do you feel about risk, and are you aware of the different levels of risk associated with different types of investments?
Answering these four simple questions can be the difference between an investment that meets your needs and goals, and one that falls short.
Choosing the right investment fund
Are you one of the many New Zealanders who have no idea what the different investment options mean? The type of fund that you invest your KiwiSaver or other investments in, depends on your unique situation and appetite for risk. If you would like a review of your investment fund, give your KiwiSaver Adviser a call.
Conservative
Generally suited to those who plan to withdraw funds within the next two to three years. They may suit an investor who has a low appetite for risk and will therefore achieve lower returns.
Balanced
Generally suited to those who are comfortable seeing a few ups and downs in their balance. They would expect to withdraw their KiwiSaver money within the next four to six years.
Growth
Generally suited to those who aren’t expecting to withdraw funds for seven years+. Their balance will fluctuate in the short term, however their long-term returns are potentially higher.
High growth
Generally suited to those who aren’t expecting to withdraw funds for ten years+. Their balance will have higher ups and downs in the short term, however provides more potential for superior growth over the long-term.
Default funds
Are you one of the many New Zealanders still in a KiwiSaver default fund? If you don’t recall ever making an active choice of fund since your employer enrolled you in the scheme, the answer is likely to be yes. And here’s why you may need to do something about it.
Low risk, low returns
Ever since KiwiSaver was launched, “default” funds have been designed to be temporary, conservative holding funds where KiwiSaver members could put their hard-earned savings before making an active choice.
Being in a “default fund” is not necessarily a bad choice – provided it is a choice. The issue with default funds is that they are low-risk, low-return options which – depending on your own attitude to risk and your goals – may not suit your unique circumstances, or deliver the returns you expect.
But while default funds were never supposed to be a long-term solution, many members “set and forget” their KiwiSaver account, possibly missing out on years of potentially higher returns.
How do you know if you are in a default fund?
- Did you join KiwiSaver by default?
- Have you switched your investment fund since then?
If you answered “no” to the latter question or you are simply not sure, you might be in a default fund.
How do you find out?
- You may know who your provider is (for example, you have received emails or post communications from them over the years) – you can call them and ask if you are in a default fund;
- If you don’t know who your provider is, you can login to your MyIR and find the information there;
- You can contact our friendly team at Cole Murray – we’ll be happy to help.
Time to talk to an investment expert?
Investing money is all about aligning your goals with how much risk you’re comfortable with. Whether it’s as simple as optimising your KiwiSaver to work for you, or building a diverse portfolio across world markets, understanding your risk profile for your circumstances can be challenging. This is where our team at Cole Murray can assist. Our experienced Financial Advisers will help you complete your risk profile and find the right approach for you.
