The best way to assess return is to compare it to a relevant benchmark. The benchmark you use will depend on how your money’s invested.
Managed funds have to provide information about how their return compares against the ‘market index return’. The market index used depends on the fund you choose. The fund update will tell you which index is used, and how the fund has performed against that index for the past five years.
An active fund charges higher fees and aims to beat the market index return, but they don’t always manage to achieve that goal.
Below is an example of the (as at 2016) return you might receive from managed funds generally used in the financial services industry in New Zealand (before fees and taxes have been deducted).
Aggressive and growth funds invest in a higher proportion of shares. This means they are more volatile, as shares go up and down in value more – but over time they typically provide a higher return.
|Type of fund||Range of annual returns you might have||Expected average annual return (before fees and taxes have been deducted)|
|Aggressive||-9.0% to 27.0%||7.5%|
|Growth||-6.3% to 21.4%||6.7%|
|Balanced||-3.6% to 16.4%||5.9%|
|Conservative||-1.4% to 11.9%||5.0%|
|Defensive||-0.7% to 10.2%||4.6%|
For more details about the return you can expect from these funds, go to Sorted's investor kickstarter.
You can view the value of New Zealand listed shares on the NZX website. It’s important to remember that shares are volatile. This means they go up and down in value a lot.
Measure the performance of a bond by working out the amount of return you’ll get compared to what you paid. This measure is known as the yield and is calculated by dividing the interest received by the face value of the bond. Note that bonds aren’t always traded at face value.
Websites like www.interest.co.nz list current New Zealand bond yields. Your provider should have information about how to review the performance of bonds from other countries.
www.interest.co.nz publishes interest rates daily. Use this information to see how the interest rate you’re being paid compares with rates paid by other financial providers.
The return you make on a direct property investment is known as a yield. In its simplest form, this is your annual rental income ÷ property value x 100.
For example, a property that was purchased for $500,000 and returns an annual rent of $26,000 would have a current rental yield of 5.2%. You can compare the average yields you might receive on properties in different regions around New Zealand on the Quotable Value (QV) website.
If you have shares in a listed property fund, you can view their value on the NZX website and see how they’re performing. There isn’t a specific benchmark for property syndicates but you could compare these to the return offered through property listed funds.