KiwiSaver funds still licking their wounds

About 80% of all KiwiSaver funds suffered losses ranging from as little as 0.1% to some as high as 20%, in the last three months of 2018.

Over half of those funds are yet to recover their losses fully by end of March this year. This is despite a very strong recovery in markets in the first three months of this year. Are you confident enough that you are in the KiwiSaver fund best suited for you?

Turn in sentiment for global markets

Funds invested in higher risk assets, such as shares, suffered most of the losses in the previous period. This included both diversified funds (which invest your money across different types of asset classes), as well as those funds that invested in just one type of asset (for e.g., in shares of global companies).

That follows on from almost a decade of steady positive growth. Geo-political uncertainties including trade wars have blunted market sentiment globally. Based on what’s unfolding, it doesn’t appear as if there will be any let up in this nervousness looking ahead. In that context, the “type” of KiwiSaver fund you choose to contribute to can have a huge impact on your retirement savings. By hundreds of thousands of dollars.

What are your options?

You should be aware that there are about 230 different KiwiSaver funds to choose from. Each fund comes with its own flavor, based on what types of assets it invests in. How and what a fund invests in is determined by the objective the fund is trying to achieve.

On that basis, it should be expected that some funds see much higher levels of ups and downs relative to others. On the other hand, these funds have the potential to provide higher returns over longer periods.

You should expect ups and downs in returns when invested in financial markets. But, you are perhaps not putting your money to the best use if you are not in the right category of funds. The question is are you taking enough risk to achieve your longer term goal, or not?

Finding the right fit

For a lot of people it may be very appropriate to be in a higher risk fund. The worst you could do is to make a decision to switch KiwiSaver funds simply because of short-term losses. That simply locks in losses, without the opportunity to recover those losses over time.

Typically, the longer you are able to remain invested in markets the better your chances of recovering any losses. Your investment time-frame should provide you a good yardstick as to which type of fund to choose. You should then take into consideration the fees charged by a fund. You could also factor in the fund’s social consciousness into your decision making.

Whenever you are ready to review your KiwiSaver fund, use this very simple tool to help you with your decision. The tool features all KiwiSaver funds available for you to contribute to.