KiwiSaver Advice: How to Choose Your Fund

I get asked a lot about KiwiSaver fund choice, and it makes sense. The right or wrong decision here can have a life changing impact over time.

Most people, when they join KiwiSaver, know there’s probably a better option than the default fund. The problem is they don’t feel confident choosing something different. In the absence of confidence, they stick with what they have and in my view, many are leaving money on the table.

A difference of just 2% per year in investment returns can add up to multiple hundreds of thousands of dollars in retirement savings over a lifetime. Small differences compound into very big outcomes.

That’s why fund choice matters far more than most people realise.

One thing we see all the time is KiwiSaver providers claiming to have “the best performance”. That obviously can’t be true. They can’t all be number one.

What’s usually happening is that providers highlight the period that looks best for them. If long-term performance hasn’t been great, but recent performance (or luck) has been strong, the focus suddenly shifts to one-year or short-term returns, with headlines about being “top of the table”. The problem is that short periods don’t tell you much.

Funds at the top one year may have benefited from favourable conditions, luck, or by taking more risk. It’s quite common for those same funds to be near the bottom the following year — a hero one year, a zero the next. If you shoot for the stars, you’re more likely to shoot yourself in the foot.

Rather than chasing whatever looks best in the last 12 months, we focus on two things:

• an excellent investment process

• strong long-term performance after fees, over at least 10 years

If an investment process is genuinely good, it should be backed up by good long-term results. That’s what gives you confidence your money is being invested sensibly and consistently, rather than just benefiting from a good run.

The goal is to be in a fund where the odds are stacked in your favour for your money to grow over time.

There is no one size fits all solution. Some providers run strong growth funds but weak conservative funds, which is why advice needs to be tailored to your situation. It should also be an ongoing process, not a one and done decision.

If you’re in a default fund, a bank fund, or even some of the most popular KiwiSaver funds, I believe there are often better choices available that can stack the odds in your favour and help your money work harder for you.

If you’d like help reviewing your KiwiSaver, or you’d like advice more broadly around investments or UK pensions, feel free to get in touch.