News | Features
29 Mar 2024 17:54
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    Watched Kiwisaver Funds Boil Too Much

    The internet can be a curse when it comes to long-term investments such as KiwiSaver.


    With many providers, you can log in and check your account balance daily. But while a watched pot might never boil, a watched KiwiSaver account can boil too much – especially at times like these.

    The volatility of your KiwiSaver fund depends on what it invests in.

    If you are in a default fund or conservative fund, only a small portion or none of your money will be in shares. Your account balance won’t be affected much by share market movements.

    But if you have invested in a balanced, middle-risk fund, roughly half your money will be in New Zealand and/or overseas shares, so your balance will probably have fallen a fair way. And if you are in a growth, aggressive, share or equity fund – or as one provider labels it, a dynamic portfolio – the drop will be bigger.

    Many people won’t have confirmed this yet. They are content to wait until their next statement. But others will be online, anxiously watching the ups and downs. More fools them.

    Long-term investing is different from most things in life. Vigilance is not good. All you need to do is decide two things when you first pick a fund. They are:

    • How long will it be until you withdraw the money, to buy a first home or to spend in retirement? If it’s more than 10 or 15 years, you’re almost certainly going to get higher growth in a fund holding lots of shares.

    • Can you tolerate market volatility? Even if you don’t keep close track of your account, there’s no escaping the news that markets are down, and that still worries some people.

    Once you’ve picked your fund, stick with it through thick and thin.

    Don’t switch funds depending on market movements. You’ll tend to go into shares after they have risen and out of them after they have fallen, and end up doing poorly.

    As Warren Buffett, who has become one of the world’s richest people through share investment, puts it, “Our favourite holding period is forever.”

    Still, those in higher-risk funds might need a bit of help to cope with market downturns. Keep a couple of things in mind.

    The first is that you drip feed your money into KiwiSaver over time.

    While your account balance has fallen, the contributions you make in the near future will buy more shares than they would have a month ago.

    Over all, of course, you’re still behind, but bargain buying does mitigate that effect.

    The second is that – even after all the proposed KiwiSaver changes take effect, by April 2013 – only about a half to two-thirds of the money going into your account will come out of your own pocket.

    To be more precise, an employee earning $20,000 will see their contribution multiplied by 2.3 because of government and employer contributions. At $60,000, the contribution will be doubled, and at $200,000 it will be multiplied by 1.8.

    Non-employees don’t do quite as well, but their contributions will still be multiplied by 1.5. Not to be sneezed at.

    Broadly speaking, then, your account would have to worse than halve before you end up with less than you would have had in lower-risk non-KiwiSaver savings. That’s a big buffer. Over long periods, it’s impossible to imagine a KiwiSaver share fund halving.

    When the market wobbles, picture your government and employer contributions as the portion on the surface of the ocean, being tossed about. Meanwhile, the money you put in is sitting quietly in the calmer depths.

    © 2024 Mary Holm, NZCity

     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    RUGBY RUGBY
    A coaching conundrum for Crusaders assistant James Marshall as they look to end their losing run in Super Rugby tonight against the Chiefs in Christchurch More...


    BUSINESS BUSINESS
    Innovative New Zealand apple producing company Rockit is focussing on its international expansion More...



     Today's News

    Entertainment:
    Tracee Ellis Ross has paid a glowing birthday tribute to Diana Ross 17:53

    Rugby League:
    NRL Good Friday: Bulldogs take on desperate Rabbitohs, Broncos renew rivalry with Cowboys 17:37

    Cricket:
    Cricket's best female all-rounder has led England to a 4-1 T20 series win over New Zealand 17:27

    Entertainment:
    YouTube star Ninja has been diagnosed with cancer at the age of 32 17:23

    Rugby League:
    The South Sydney rugby league team is ready to lift itself off the canvas and floor the Canterbury Bulldogs in their Good Friday NRL contest 17:17

    Golf:
    Kiwi golfer Lydia Ko heads into the second round of the latest LPGA tournament in Arizona right on the cusp of the cut 17:07

    Rugby League:
    South Sydney rugby league coach Jason Demetriou has urged fans not to worry about his mental health 16:57

    Entertainment:
    Pierce Brosnan has given his seal of approval to Aaron Taylor-Johnson as the next James Bond 16:53

    International:
    World Court orders Israel to 'take all necessary and effective' action to ensure Gaza has access to humanitarian aid 16:27

    Entertainment:
    Katie Price has warned young women to avoid filler and Botox and urged them to think twice about cosmetic surgery 16:23


     News Search






    Power Search


    © 2024 New Zealand City Ltd