Are Index Funds safe? Where is a good place to invest savings?

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“Financial stuff (shares, stocks, the economy in its entirety) both confuse and bore me but I’m trying to become aware of where I should be looking to invest my money as I get older and have to be smarter. I’m looking to put money away for long term savings and want to put it somewhere where it will earn more than a term deposit or normal savings account.
Are index funds generally safe to invest in over the long term where I can keep putting money away every week into a few different ones and just forget about it without having to worry about it tanking and losing it all on a random Tuesday 6 years from now like I presume happens with stocks and stuff.
I’ve also been thinking about putting savings into a growth investment account with simplicity just like a KiwiSaver. Does anyone have experience with this? How do they compare? Also any other suggestions are appreciated.
I know there’s no definitive answer otherwise everyone would be getting rich but just want to hear people’s opinions and wisdom and knowledge.
Thanks 🙂“

(Original question on Reddit)
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Investing your money wisely is a prudent step toward securing your financial future, and it’s great that you’re considering long-term savings options. Let’s address your questions and concerns.

Are Index Funds Safe?: 

Index funds are generally considered a safe and reliable long-term investment option. They offer a level of safety that stocks often can’t provide to investors due to the following:

Diversification: Index funds typically track a broad market index, such as the S&P 500, which includes many different stocks across various industries. This diversification helps spread risk and reduces the impact of a single company’s poor performance on your overall investment.

Low Management Fees: Index funds have lower fees compared to actively managed funds. This is important because high fees can eat into your returns over time.

Historical Performance: Over the long term, index funds have shown consistent, competitive performance. While they may have fluctuations, they follow the market’s overall trend, which generally goes up over time.

KiwiSaver in New Zealand:

KiwiSaver is a savings scheme in New Zealand that is supported by the government to assist in saving for retirement. It comes with numerous benefits that an Index fund just can’t offer, including employer contributions, government contributions (in specific situations), and the ability to select from a variety of funds that align with your risk tolerance and financial objectives. KiwiSaver is an excellent choice for long-term savings, and many New Zealanders use it as their primary retirement savings instrument.

Consulting a Financial Professional:

While the above information provides a general overview, it’s crucial to consider your individual financial situation, goals, and risk tolerance. Consulting a financial advisor or planner is a smart move, especially if financial matters bore you or you need guidance on where to invest. A professional can help create a personalised investment strategy that aligns with your objectives and risk tolerance.

In conclusion, index funds and KiwiSaver are both viable options for long-term savings and can offer a level of safety due to diversification and government support, respectively. However, individual circumstances vary, and consulting a financial professional will help ensure your investment strategy is tailored to your specific needs and goals. Remember that long-term investing typically involves some market fluctuations, but over time, it has historically produced positive returns.

Hope this helps.

Regards, Clive Fernandes (Financial Adviser)

Director – National Capital 

Disclosure:  I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.