Do you know what type of fund your KiwiSaver investment is in? Find out why it matters if your a first home buyers!

 We asked Authorised Financial Advisor (AFA) Gary Warner of True North Investments this question, here is Gary’s Advice;

There are a many types of KiwiSaver funds differing in their levels of volatility- typically they range from very defensive funds primarily invested in cash through to conservative funds predominantly invested in fixed interest , these are followed by more balanced funds with a mix of fixed interest and growth assets such as shares and property, further up the volatility scale are the growth and aggressive funds that are predominantly full of shares and very little allocation to income assets.

So, the more growth asset orientated that the fund is the more volatility you are likely to get with that fund. Volatility is simply how quickly an investment changes over a period of time.

This potential volatility is why it is very important to be invested in the right type of funds – especially if you are saving for your first home where it is likely that you will require most of your kiwiSaver funds after a fairly  short period, around five years or so, compared to a typical period of over twenty years when saving for retirement- so you would not want your funds heavily reduced by a big turn down in the share market prior to making that first withdrawal for your first home deposit.

Therefore, I would recommend to anybody that is using kiwiSaver as a  savings vehicle for their first home to place your contributions into a conservative fund or moderate fund where more than 50% of your monies are not exposed to the sharemarket.

Once the first home purchase deposit has been removed from your KiwiSaver account then you can reassess and start directing your contributions to Growth funds that are more appropriate to a longer time frame savings plan. At this point it’s worth talking to an adviser who will be able to help you ascertain which level of potential volatility is suitable to you.

 

Need some KiwiSaver advice?  Contact Gary Warner from True North Investments on 027968-5285 or visit their Website