Wrong KiwiSaver can cost you money
Conservative, Balanced or Aggressive. This is important because your investor type dictates the asset allocation that you will have: the proportions of shares, property, bonds and cash which should make up your fund. Your investor type should not be a guess. It is determined by the amount of time you will be investing for, your financial capacity (ability to withstand a financial shock) and the strength of your nerves during periods of bad returns. The best place currently to determine your investor type is the ‘‘fund finder’’ on the Sorted website. Answer a few basic questions and it will tell you the type of investor you are and what type of fund to be in.
When you know that, your second step is to look at all the funds of that type. Take care as some funds are mis-named: as I have shown previously on these pages, some funds may be labelled one thing when the reality is another. For example, a fund may call itself ‘‘balanced’’ but with over 70 per cent of the fund in shares, in reality it is a growth fund.
Nevertheless, when you start to pick your way through the funds in your category, there are two things that are important. The first of these is fees and the second is past returns. Considering these will give you a rough assessment but, although better than nothing, such consideration is not complete.
Professional fund researchers will look at a great deal more than simply these two factors, and that is where Paul and his new business ought to find a market.
It is critical that you go into the right type of KiwiSaver fund – there is serious money on the table.
A big proportion of the 2.3 million people in KiwiSaver will be in the wrong fund.
Martin Hawes is an Authorised Financial Adviser and a disclosure statement is available on request and free of charge, or can be found at www.martinhawes.com. This article is of a general nature and is not personalised financial advice.