KiwiSaver: Choosing a Fund That’s Right for You

KiwiSaver: Choosing a Fund That’s Right for You


The editorial below reflects the views of the editorial contributor only and content may be out of date. This article is sourced from a previous JUNO issue. JUNO’s content comes from sources that it considers accurate, but we do not guarantee that the content is accurate. Charts are visually indicative only. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.


By Donna Nicolof, Head of Wealth & Private Bank, BNZ

When you join a KiwiSaver scheme, you need to choose what type of fund you’d like your savings to be invested in. Most scheme providers offer a choice of funds, each of which invest your money slightly differently. If you don’t choose an investment fund yourself, your savings will usually be invested in your provider’s conservative fund. This may or may not be the right option for you. 

Along with the amount that you contribute to your KiwiSaver account, your choice of investment fund can be one of the most important factors in determining whether or not you achieve your savings goals. 

Most KiwiSaver funds are managed-fund investments where returns can vary over time and, in some cases, can be negative. Understanding how KiwiSaver funds behave, and why, can help you to choose a fund that’s right for you.

Different investments have different characteristics

Most KiwiSaver scheme providers offer a range of funds. Each fund has different characteristics, determined by what assets that fund invests in. As with most investments, the two characteristics that are most important to understand are risk and return. 

Generally, we expect investments that are more reliable and less prone to capital loss to generate lower long-term returns. Investments in cash and fixed interest (or bonds) are good examples of these. These are generally classified as ‘income’ investments, simply because they have the ability to provide a stable income over time. However, they may not provide you with a significant amount of capital gain.

On the other hand, more volatile investments, which can experience occasional periods of capital loss, would usually be expected to generate higher long-term returns. Examples of these are shares, listed property securities and commodities. These investments are generally classified as ‘growth’ investments, since they have the ability to provide investors with significant capital growth over time. 

The all-important risk and return trade off

KiwiSaver funds are generally classified by the proportion of money they have invested in these ‘income’ and ‘growth’ assets. The below chart illustrates the general classifications of KiwiSaver funds and their expected long-term risk and return characteristics.

As you can see, ‘cash’, ‘conservative’ and ‘moderate’ fund types invest most of their money in ‘income’ assets and have lower levels of risk and potential return. The ‘balanced’, ‘growth’ and ‘aggressive’ funds have higher risk and return characteristics with greater allocations to ‘growth’ assets. 


If your goal is to achieve a high long-term investment return from your KiwiSaver savings, and you’re willing and able to accept a higher level of risk to achieve this, you might want to consider a fund that will invest more of your money in ‘growth’ investments. But if you want a lower risk, and you’re happy to accept a more modest long-term investment return, then you may prefer a fund that will invest more of your money in ‘income’ investments.

Choosing the right level of risk for you

Consider how long you have until you need your KiwiSaver savings. People with time on their side can generally afford to take some investment risk. With time comes the ability to recoup any short-term setbacks, which financial markets can go through now and again. But if you’re close to making a withdrawal for retirement, or if you’re buying a first home, you often won’t have time on your side, and you’ll probably want to take less risk with your investments. 

You might also want to think about whether some of your long-term savings and retirement needs can be met by other savings or investments you hold outside of your KiwiSaver account. If you’re relying solely on your KiwiSaver account, your ability to take on risk may be diminished and so it may pay to be more cautious with your investment choices. 

Now spend some time considering your tolerance for experiencing the ups and downs that come with investing in financial markets. Are you comfortable with the thought of taking some risk, or does the possibility of losing money keep you awake at night? 

Your experience of investing in financial markets will also determine your risk preparedness. Do you have a good understanding of where your money is being invested and the types of risks and returns that come from these investments? Or is this the first time you’re investing in financial markets?

Don’t worry — help is at hand

The good news is that there’s plenty of information to help you make informed decisions about your choice of KiwiSaver fund. Talk to your scheme provider. Most will have a risk profile tool that will assess the level of risk you are comfortable with, before recommending an appropriate fund. 

Your provider should also be able to refer you to an Authorised Financial Adviser, who’ll be able to offer you personalised advice, specific to your situation. Either way, don’t be afraid to ask questions of your provider — they’re there to help. 

There are also plenty of other useful resources (see below) that can help you with tips and advice, or provide access to tools and calculators to help ensure you’re on the right track.



•   Kiwisaver.govt.nz

The Government’s KiwiSaver website is full of information to help you understand more about how KiwiSaver works. Plus you can find a list of all of the current KiwiSaver scheme providers.

•    Sorted.org.nz

Brought to you by the Commission for Financial Capability, this website contains valuable resources for anyone who is, or is considering, investing in a KiwiSaver scheme. Its ‘Fund Finder’ tool will help you compare different funds across scheme providers. It also has many other useful tools and calculators.

•    KiwiSaver scheme providers’ websites

New legislation means all KiwiSaver scheme providers must make available, on their websites, quarterly and annual disclosure statements. These adopt a standard format, so it’s easy to compare different funds.