Should I change my Kiwisaver fund?

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“I have a decent amount of savings, saved in Kiwisaver and am currently banking with Westpac. I’m currently doing the conservative fund but am thinking about moving it to the growth fund. What are some pros and cons I should consider?
Also should I move the whole lot to invest in growth or only future payments into kiwisaver to invest in the growth fund?”
(Original question on Reddit)
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Deciding whether to change your KiwiSaver fund from a conservative option to a growth fund is an important financial decision. That decision will depend on your financial goals, volatility tolerance and time horizon.

The most important factors to consider are your financial goals and time horizon. If you are saving for retirement, which is still a long time away, sticking with a growth fund will give you much better returns when you reach retirement age. On the flip side, suppose you are considering buying your first home in the coming year or so. In that case, it might be wise to stick to a conservative fund type to reduce the volatility you might experience. This way, you can reduce the ups and downs of your KiwiSaver and ensure you don’t lose too much of your KiwiSaver value in that year or so before buying that first home.

Then, there is volatility tolerance. If you don’t mind seeing your KiwiSaver balance go up and down and are investing for the long term, more than 5-10 years, then a growth fund would be worth considering as this will give better returns over the long term. However, if you are more sensitive to volatility and get a bit uncomfortable when you see your balance drop down, then additional consideration and education might be needed before you move to a growth fund.

Now you understand the factors to consider when deciding to change your fund, let’s get into some pros and cons of a growth fund.

Pros of Moving to a Growth Fund

Higher Growth Potential:

Growth funds typically invest more in assets like stocks, which historically have the potential for higher long-term returns than conservative funds that focus more on fixed-income investments. This can help your savings grow faster, giving you greater returns.

Long-Term Goals:

If you have a long time horizon (e.g., many years until retirement), a growth fund may align better with your goals because it’s designed for long-term growth.

Inflation Protection:

Growth funds can help your savings keep pace with inflation, preserving your purchasing power over time.

Cons of Moving to a Growth Fund

Short-Term Volatility:

Growth funds can be more volatile in the short term, and your account balance may fluctuate more. If you need the money soon or can’t tolerate these fluctuations, it may not be the best option, especially if you have short-term goals planned with your KiwiSaver, such as buying a home in the next year. Investors need to be patient and ride the market with a growth fund.

Ultimately, the decision should align with your financial goals, risk tolerance, and time horizon. Remember that KiwiSaver is a long-term savings vehicle, and the right choice depends on your unique circumstances. It’s essential to be well-informed and decide to match your financial objectives and comfort level with risk.

Consider seeking advice from a financial advisor who can assess your individual financial circumstances and risk tolerance. They can provide personalised guidance and recommendations on whether to move existing funds and which ones based on your unique financial situation.

Hope this helps.

Regards, Clive Fernandes (Financial Adviser)

Director – National Capital

Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.