Financial markets have started the year on a weak note. Award-winning KiwiSaver provider Milford spoke with Newshub about what's behind the moves and what it means for KiwiSaver investors.
Interest rates are the foundation of financial markets. Record low interest rates have helped share markets move higher in recent years. But interest rates are now being raised in many countries to slow down surging inflation, and this change in the landscape is impacting investors around the world – including KiwiSaver investors.
If your KiwiSaver provider is an active manager they will be doing their best to take advantage of the opportunities of this changing landscape.
What does this mean for me?
Falling markets can test even the most experienced investors. For most people, KiwiSaver is a long-term investment. Although it can be really hard to see your balance going down, history shows that sticking with your strategy through the ups and downs should deliver a better result over the long term.
However, choosing the right fund in the first place isn't always an easy decision. Here are a few tips to set you on the right path.
How to choose the right KiwiSaver fund
When choosing your KiwiSaver fund, you want to consider three things:
Your investing goals. There are a range of goals for KiwiSaver investors. For example, are you saving for a first home? Are you saving for retirement? Or perhaps you're already in retirement and using your KiwiSaver to draw an income to help fund your lifestyle.
Your investing timeframe. Your goals will impact your timeframe. If you're saving for a home in the next couple of years, you have a short investing timeframe. However, if you have many years until retirement, then your timeframe is a long one.
Your risk tolerance. This is how comfortable you are with the trade-off between risk and return. Higher-returning funds are also higher-risk. Are you happy to accept more falls in value if you're more likely to get higher returns in the long term? Everyone's risk tolerance is different – if you're curious about your own, there are tools online to help.
Working through these three steps will help you choose the right fund for you. If you're not feeling confident at this stage, don't worry, you don't have to go at it alone.
Getting advice can help
Another way to set and reach your investing goals is to seek advice. There are many sources of advice, including family and friends, but we'd suggest you stick to choosing a professional to help. Whether that's a Milford Adviser, an independent financial adviser in your community, or one of the online advice tools, they can help you to set your goal and create the right plan to achieve it.
Research by the Financial Services Council in 2020 showed that New Zealanders who get advice save more, invest more, travel more and overall have improved wellbeing. It also showed that those who seek advice have KiwiSaver balances over 50 percent larger than those who don't and have greater peace of mind and confidence in making financial decisions.
If you don't have a savings goal or aren't sure if you will achieve the goal you've set, then check out our Digital Advice Tools.
Disclaimer: This article is intended to provide you with general information only. It does not take into account your objectives, financial situation or needs. Please read the relevant Milford Product Disclosure Statement as issued by Milford Funds Limited at milfordasset.com. Before investing you may wish to seek financial advice. For more information about our financial advice services and to see our Financial Advice Provider disclosure visit milfordasset.com/getting-advice. Past performance is not a reliable indicator of future performance.
This article was created for Milford.
