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Preparing for investment storms

Media release
MR No. 2018 – 35
6 September 2018 

KiwiSaver members can prepare for investment storms by being in the right type of fund and continuing to contribute through any downturn.

As part of the Sorted Money Week 2018 ‘Weathering the storm’ the Financial Markets Authority (FMA) is focussing on helping younger KiwiSaver members prepare for when investment markets fall in value.  

Simone Robbers, FMA Acting Director of External Communications and Investor Capability said: “Being in the right fund for your needs is the best way to prepare.

Switching from a high risk growth fund to a conservative fund when markets tumble means you lock in any losses. So think about your longer term investment horizon and when you need the money and stick with your plan.”

Lower risk funds such as defensive or conservative funds are better if you need the money to buy a first home in the short-term (3-7) years, while growth or aggressive fund are better in the long term.

However, on the flipside, that performance comes with a lot more volatility. The average growth and aggressive funds have recorded swings of around 20% in a calendar year in the last ten years.

In the five years to the end of March 2018, here’s how the average fund type performed.

Fund Type

Average Return (after fees, before tax)

Defensive

3.2%

Conservative

5.2%

Balanced

7.8%

Growth

9.6%

Aggressive

10%

The FMA has published a KiwiSaver risk quiz for Money Week, targeting younger KiwiSaver members. So far almost 10,000 people people have taken the quiz.

Many KiwiSaver members in the 18-30 age bracket have not experienced a major fall in the value of their investments in their adult lifetimes. KiwiSaver is a long-term investment and members can best prepare for a downturn by choosing the right fund for their goals and their attitude to risk.  

Contact:

Edwin Mitson
Senior Adviser, Media Relations
021 084 99210

Notes to editors:

The average return after fees is calculated from information filed by KiwiSaver funds to the Disclose register. It excludes fixed membership fees.