Understanding the Role of Risk in Your KiwiSaver Choices

Risk is a word that can make anyone nervous, but it’s a natural part of investing. Risk has a role. The key is to understand how much risk you’re comfortable with and how it aligns with your goals.

• Low Risk: Conservative funds aim to protect your capital but offer lower returns. They’re great if you want peace of mind and stability.

• Medium Risk: Balanced funds mix safety and growth, offering moderate returns with moderate risk.

• High Risk: Growth and aggressive funds can deliver higher returns but come with more ups and downs.

  
  

Think of risk like the weather on your financial journey. Sometimes it’s sunny and calm, other times stormy and unpredictable. The trick is to pack the right gear (investment choices) for the conditions you expect.

Personally, I prefer the word volatility instead of risk. Some investments will go up and down more than others, but history shows us that by spreading your volatile assets widely you decrease the risk considerably. All KiwiSaver funds are highly diversified; your eggs aren't all in one basket.

If you’re unsure about your volatility tolerance, try asking yourself: How would I feel if my KiwiSaver balance dropped 20% in a year? If that thought keeps you up at night, a more conservative approach might suit you better.

How Property and Shares Fit Into Your KiwiSaver - and their role of risk

KiwiSaver funds often invest in shares and property because these assets have the potential to grow your money over time. But what does that mean for you?

• Shares: When you invest in shares, you’re buying a small piece of a company. Shares can offer high returns but can also be volatile. They’re like a rollercoaster ride - thrilling but with ups and downs.

• Property: Investing in property through KiwiSaver funds means your money is pooled with others to buy commercial or residential properties. Property tends to be less volatile than shares but still offers good growth potential.

  
  

Funds that invest more in shares and property usually aim for higher returns but come with higher volatility (aka risk). Those with more cash and fixed interest investments are more stable but grow more slowly.

Balancing these assets in your KiwiSaver fund helps you manage risk while aiming for growth.

Property investment is a key part of many KiwiSaver funds

Taking the Next Step with Your KiwiSaver

Here’s a simple action plan to help you move forward:

• Check Your Current Fund: Log in to your KiwiSaver account and see what type of fund you’re in, and the level of risk you are exposed to.

• Assess Your Goals: Are you saving for retirement, a first home, or both? Your goals will guide your fund choice.

• Explore Your Options: Visit Solid Steele KiwiSaver Advice to learn more about different funds and get expert guidance.

• Make Changes if Needed: Switching funds is easy and can be done online. Don’t be afraid to adjust your investment choices as your life changes.

• Stay Informed: Keep an eye on your KiwiSaver performance and market trends. Knowledge is power when it comes to your money.

  
  

Remember, your KiwiSaver is a powerful tool. With the right choices and a bit of attention, it can help you build a secure financial future.

By understanding and actively managing your KiwiSaver investment choices, you’re not just saving money - you’re crafting a financial story that suits your life’s journey. Whether you prefer a steady path or a more adventurous climb, there’s a KiwiSaver fund that fits your style. So why wait? Start exploring today and take control of your financial future.

Book a meeting with me today by clicking here

Simple Steps. Solid Results

Written by Cameron Steele, KiwiSaver Specialist & Financial Adviser based in Christchurch, New Zealand.