How to choose the right KiwiSaver fund

The single biggest decision in KiwiSaver isn’t your provider or even your contribution rate – it’s the fund you’re in. Get this right and the rest follows. Here’s how to think about it.

Funds sit on a spectrum

Every KiwiSaver fund is really just a recipe of two ingredients: growth assets (shares and property) and defensive assets (cash and bonds). The mix is what gives a fund its label:

• Defensive / Conservative – mostly cash and bonds. Steady, but slow to grow.
• Moderate – a cautious mix, a little more growth.
• Balanced – an even split of growth and defensive assets.
• Growth – mostly shares and property. More ups and downs, more long-term growth.
• Aggressive – almost all growth assets. The bumpiest ride, aimed squarely at the long game.

More growth assets usually mean higher returns over long periods – but also bigger drops along the way.

Two questions decide it

You don’t need to be an investor to choose well. It mostly comes down to:

1. How long until you’ll use the money? The longer your timeframe, the more short-term ups and downs you can ride out – and the more growth assets you can usually afford to hold. Someone in their 30s saving for retirement has decades for the market to recover from any dip. Someone buying a first home next year does not.

2. How would you feel in a downturn? If seeing your balance fall 20% in a bad year would tempt you to panic-sell at the bottom, a slightly calmer fund you’ll actually stick with can beat an aggressive one you bail out of at the worst moment.

The most common mistake

Far too many Kiwis with 20 or 30 years ahead of them are sitting in a conservative or default fund that’s far too cautious for their timeframe. Played out over decades, that caution can quietly cost tens of thousands of dollars in growth they never see.

The opposite mistake is being in an aggressive fund with a first-home purchase around the corner – a downturn at the wrong moment can shrink your deposit just when you need it.

Active, index and ethical

Beyond risk level, you’ll also see choices like active funds (a manager picks investments to try to beat the market) versus index funds (which track the market at low cost), and responsible or ethical funds that screen out certain industries. All can be sensible – the key is whether the fees match the value you’re getting.

How we help

Choosing a fund is exactly the kind of thing that’s simple once someone walks you through it. Run a free check to see how your current fund stacks up, or book a review and we’ll match you to a fund that fits your goals – not last year’s headlines.