Going for Growth - Part Three of How to Choose a KiwiSaver Fund
And last but not least, our growth fund.
Of all three funds Simplicity offers, our growth fund has the highest membership. As of Dec.31, 2016, we had 1,600 members with more than $47 million under management.
The fund, launched Sept.1, 2016, was also our best performing fund over that same period, returning 1.9% after fees.
Among 24 of its peers in KiwiSaver, it came in second place. That's according to Morningstar's KiwiSaver latest quarterly report.
Why is this our most popular fund?
For the majority of investors, KiwiSaver is a long-term investment. As such, most KiwiSavers want to capture the long-term higher gains associated with growth type funds.
Historical fund analysis has shown that over the long term, funds with a greater allocation of shares, have delivered better returns.
Does that mean everyone who is in KiwiSaver for the purposes of retirement should be in a growth fund? Not necessarily.
Not all investors can handle the higher volatility that comes with being in a growth fund. While many might hope only to see returns in positive territory, we know that exposure to equities also means down times too. A growth investor ought to understand that being invested in a fund that is comprised of higher allocation of shares means inevitable down cycles as well, given the economy and companies are not always stable.
It's time in the market, not timing the market
It's time in the market that helps to smooth out those bumps. And most KiwiSaver have time which would account for the higher numbers of investors in our growth fund.
For nervous investors who can't sleep at night knowing their investments could be vulnerable to market shocks, sacrificing the potentially higher returns for peace of mind may be good reason to be in a Balanced or Conservative fund.
Also, for those who are looking to withdraw some of all of their funds within a shorter time frame, whether it's retirement at 65, or buying their first home, there is a case to stay with a fund that is not as volatile as a growth fund.
On the risk scale, with 1 (low) and 7 (high), the growth fund is rated a 4.
To help you clarify your own attitude to risk, you can seek financial advice or work out your risk profile at Sorted.org.nz
See the product disclosure statement (PDS) for more information about the risks associated with investing in this fund.
At Simplicity, regardless of what fund you are invested in, you can track the performance of your fund over time. We have a feature called \"My Money - Show History\" on our members website portal, where you can see how your fund's tracked from the time you first started invested. You'll also see how the unit price changed in that time as well.
With passively managed index tracking funds such as ours, the long-term returns are enhanced with the added benefit of lower fees. Simplicity KiwiSaver funds, across all three of our fund types, have the lowest fees. Find out for yourself here on the Fund Finder with Sorted.org.nz.
Our international equities are managed by Vanguard International, the world's largest asset manager with more than $3.5 trillion under management.
Following some strong campaigning last year by Simplicity, Vanguard launched a fund that excluded arms manufacturers, Big Tobacco, and nuclear weapons companies. It's called the Vanguard International Shares Select Exclusion Index Fund. it's hedged 100% back to the New Zealand dollar.
If you look at our latest fund update here, you'll see the funds top 10 holdings including the fund above.
And if you have a look at the pie chart below you'll see how the asset allocation breaks down.
Finally, if you'd like to learn more about why passively managed funds are becoming so popular world-wide, check out managing Sam Stubb's opinion piece here on why investors in passive funds will be long-term winners.
Amanda and The Team at Simplicity %)