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KiwiSaver investment ups and down 101

Published on 18/10/2016

KiwiSaver is often referred to as a set and forget investment. 

Chiefly because it's a retirement savings vehicle. Unless you are using it as a deposit on a first time home,  you won't touch your nestegg until age 65. As such, it doesn't do the panicky investor much good checking on their investments on a daily basis. We know that investments go up, and we know they go down. Eventually time smoothes out the bumps and the upside is a considerable one, at least history has shown that where shares and bonds are concerned. 

Markets are moving all the time and it's the nature of the beast. Sometimes we just have to remind ourselves to hold the course. 

For the educated investor or perhaps curious KiwiSaver, it's much harder to set and forget because we are keen to know what's happening.

At Simplicity we believe in transparency at every level and so we make that curiosity an easy itch to scratch. You can see whenever you want how your funds are performing. As our chief operating officer Andrew Lance explains in this video, it's a double edged sword. On one hand, you are getting unprecedented daily insight into your KiwiSaver which is good. On the flip side, it can be a nerve wracking experience to see your balance dip in reaction to market jitters, like what's happening currently leading up to the U.S. presidential election. Call it the Trump effect.

A few things to remember

Simplicity is passively managed and we track the index. What does that mean? It means we don't buy and sell stocks on a frequent basis and chop and change at the first hint of trouble.

We own more than 9,000 investments spread across 23 countries which provides protection against exposure to any one market that may be in trouble. Our foreign investment are managed by Vanguard, one of the world's largest and most experienced asset managers. 

Simplicity affords you control. You can change your fund from conservative to balanced to growth through our web app. Moving from fund to fund frequently is not encouraged however it is within your power to do so when you want to.  Remember, the benefit of a down cycle is that when the market does recovers, you gain the pick up. When you are investing money on a monthly basis, as you are in KiwiSaver, dollar cost averaging is your friend.

While we don't forecast our returns, and we can't supply performance history until one year in business, we are confident our returns won't be far off our peers operating in this space because we are invested in much the same as our competitors. And when you factor in our lower fees, and the compounding effect of having more in your account to invest, the outlook is favourable.

Our asset allocation closely follows a survey of the KiwiSaver providers conducted by Morningstar.  The survey shows the average allocation to each asset class for a range of risk categories; conservative, balanced, growth, etc.  The latest survey can be found on the link below. 

Morningstar Indices