Tracking KiwiSaver Success: A Guide to Understanding Fund Performance in New Zealand

Best performing KiwiSaver Funds

KiwiSaver is a government-backed retirement savings scheme that helps Kiwis of all kinds save for their futures. The best performing KiwiSaver funds allow you to gradually build your wealth, helping you reach financial milestones like buying a new home or funding your children’s education. 

KiwiSaver works by using contributions from yourself, your employer and the government. After you join a KiwiSaver fund, your money will be invested in a managed fund. Each KiwiSaver provider manages funds by investing the money into assets. The fund’s performance will depend on the market, management decisions and fees. 

Of course, you want to make the right choice for you. There are a variety of funds available with different risk levels, fees and so on. Your money’s long-term growth will depend on how your fund performs. Even small differences can have an impact on your long-term growth. 

What To Know Before Choosing From The Best Performing KiwiSaver Funds

It’s always wise to be well-informed before you make any investment decisions. What should you know about KiwiSaver funds?

  • Returns Aren’t Guaranteed. Just because a fund performs a certain way this year doesn’t mean the trend will continue next year. When you invest in anything, you take on some level of risk, so it’s important to look at the big picture. Look at fund performance from a long timeframe, rather than short-term results. 

  • Risk Affects Returns. There are higher-risk, higher-reward funds and lower-risk, lower-reward funds. The former are riskier but have better potential, the latter are safer but offer more gradual growth. You must understand your risk comfort level before you make your choice. 

  • KiwiSaver Is Simple. Unfortunately, many Kiwis aren’t saving as much as they should. KiwiSaver seeks to remedy that by making the process simple and accessible for anyone interested. You need to pick the right fund, contribute money and be patient. 

  • Being In The Wrong Fund Can Cost You Money. When you’re not earning your full potential, you’re losing money from lost profits. Being in the wrong fund for an extended period of time can have a real effect on your results. 

  • If You Don’t Choose A Fund, You’ll Be Assigned A Default Fund. If you sign up for KiwiSaver but don’t pick your fund, then you’ll be given a default fund from a default provider by the IRD. These funds are unlikely to be the best choice for you. Luckily, you can always change your fund. 

Choosing The Best Performing KiwiSaver Fund For You

Making the right choice can be a stressful decision. What should you do?

Work With A Professional. Your best bet is to work with someone who knows what they’re doing, especially if you’re new to KiwiSaver or investing in general. Reach out to professionals, like our team at Future Wealth, to get the KiwiSaver conversation started.

We encourage you to be open and honest about your current finances and your overall goals so we can provide you with accurate, personalised services. 

Understand The Fund Types. These are the main categories for KiwiSaver funds:

  • Conservative Funds. These are low-risk, slow-growth funds. Conservative funds are popular for short-term (1-3 years) goals like first home deposits.

  • Moderate Funds. These are moderate-risk, gradual-growth funds. These are best for medium-term (3-5 years) goals. 

  • Balanced Funds. These are fair-risk, solid-gain funds. Their balanced nature makes them a good fit for longer medium-term (5-10 years) goals. 

  • Growth Funds. These are higher short-term risk, higher-gain rewards. These are better for longer-term rewards (Over 10 years) or for those who are comfortable with the higher risk. 

  • Aggressive Funds. These are the highest-risk, highest-reward funds. They’re often chosen for long-term (10-15+ years) goals. 

Understand The Fees. All KiwiSaver funds charge fees, including membership fees and management fees. They’re usually charged as a percentage of your investment. Consider your potential profits while accounting for the fees. 

Determine Your Goals. Different KiwiSaver fund types are more suitable for different goal lengths. While conservative funds are best for short-term goals, aggressive funds are best for the long term. Think about the specific goals you’re trying to save up for (buying a home, retiring, etc) and how far away those goals are. This will help you choose your fund type, which will then make it easier to focus on the best-performing KiwiSaver funds that are most suited to you. 

Evaluate The Performance Of Your Potential Funds. Once you’ve narrowed down your options, you can then compare different funds to choose the perfect one for you.

  • Funds Of The Same Type. You should only compare funds of the same type. Risk profiles drastically affect expected returns, so don’t compare a low-risk fund to a high-risk fund.

  • Think About The Long-Term. Finances are important, so it can be challenging to be patient. However, you must think about your savings in the long term. Look at a fund's performance for the last 5-10 years, not just the last year. 

  • Consider After-Fee Performance. Remember that you’ll need to pay fees for your fund, and fees can reduce your returns. Think about performance after the fees are subtracted. 

Making The Right KiwiSaver Choice With Future Wealth

The best time to start investing is right now, and we at Future Wealth are here to help. On top of KiwiSaver, we’ll also be happy to discuss financial planning, retirement savings and more. Our goal is to help our clients build a solid, financially stable future for themselves. 

Would you like to book your free chat? Call us on 027 628 8010 or reach out online today.

Future Wealth: Start now and build your way to a better future.

Matt Golding