GOT A FINANCIAL GOAL IN MIND BUT NOT SURE HOW TO GET THERE?

Investing your money is a great way to grow your savings for a particular goal you might have set yourself. So what’s the difference between investing in the share market, contributing to your KiwiSaver account or putting money in a term deposit? We know

Most people have heard of term deposits and shares. While term deposits are generally well understood, they may not provide the level of returns an investor is after. The share (or stock) market, on the other hand, offers the potential for higher returns but comes with higher risk. Investing directly in the share market yourself requires time, knowledge and confidence.

WHAT IS AN INVESTMENT FUND?

Instead of investing directly in the share market yourself, you can put your money into a professionally managed investment fund. Investment funds make becoming an investor really easy. You get the benefits of a professionally managed portfolio without having to do all the detailed work yourself.

And, when you join an investment fund, you become an investor in some of the very best local and international companies and brands that you may well use on a daily basis. There may also be some companies that you have never heard of, but which are making great gains in their business specialty.

WHY USE AN INVESTMENT FUND?

The beauty of an investment fund is that you don’t need to have done a lot of research or have extensive knowledge of share markets to know your money is invested in the best places. The fund manager who is in charge of the fund will do that for you.

On top of that, the fund manager has a team of investment experts who review, research and analyse companies and market trends. This means you benefit from years of combined financial expertise and experience with very little effort of your own! The added bonus is that you can learn as you invest by keeping an eye on the decisions that are made on your behalf.

WHAT IS A TERM DEPOSIT?

A term deposit involves depositing money with a bank. In this case, you are actually lending money to the bank. They will pay you a fixed interest rate over the ‘term’ you have signed up for and they will return your original investment at the end of the term. They are useful in situations where you have a specific need for your money at a particular future date or you are not comfortable assuming a potential reduction in your investment value. With interest rates at historically low levels, term deposits are currently not returning as much as they used to.

HOW IS AN INVESTMENT FUND DIFFERENT FROM KIWISAVER?

Investment funds are very similar to a KiwiSaver fund but you don’t have to wait until you buy your first home or retire to access the funds. In fact, you can access your funds at any time, which makes it perfect for more shorter-term financial goals like a renovation, a holiday, a new car or to support your children later on.

It is definitely worth considering having both a KiwiSaver account and an investment fund if you can.

RISK VS RETURN

There are different types of investment funds that suit different types of investment goals and different appetites for risk. It is important you understand the risks and choose a fund that aligns with your risk tolerance (i.e. how much risk you are comfortable taking on board).

So, before you start your investment journey, you need to be clear on three factors. Firstly you must understand your goals (what you are trying to achieve), followed by your investment timeframe (how long do you want your money in an investment for) and finally, your tolerance for risk.

CHOOSING THE RIGHT FUND FOR YOU

Milford offers twelve different investment funds, each one with a different objective to suit nearly any investor. Our lower-risk funds prioritise the stability of your investment and aim to produce lower but more predictable returns.

Alternatively, our higher-risk funds prioritise the growth of your investment and aim to produce higher returns. The trade-off is that those returns are less predictable, meaning the fund may go up and down in value more often. This is called volatility.

Our risk profile tool can help you identify a fund that might suit you. You can find this at milfordasset.com/tools-guides.

READY TO INVEST?

Start your investment journey and see our investment track record at milfordasset.com