Investment Options

CONSERVATIVE, BALANCED OR GROWTH INVESTMENT?

 

HOW TO DECIDE WHAT INVESTMENT DIRECTION IS RIGHT FOR YOU

When you join KiwiSaver, like it or not, you become an investor. You may not have the interest or the expertise to manage investments (that’s what we’re here for), but you do have to set guidelines so we will manage your savings appropriately for your needs and situation. We call it setting your “investment direction”—the combination of Conservative, Balance or Growth investments that suit you.

Growth, Balanced, Conservative. What’s the difference?

Conservatively managed funds (more exposure to term deposits and fixed interest investments) generally produce steady growth, whereas Growth funds (more exposure to share markets) have the potential to be volatile—the value of the investment can go up or down from day to day, and sometimes the gains or losses can be significant. Balanced sits between the two.

Historically investments in share markets (Growth) have produced higher average returns than cash or fixed interest (Conservative). Investments in share markets have also caused people to lose their shirts. Along with the potential for higher returns, come higher risks.

And no, you can’t have a Growth fund that just grows! If you want to invest in growth over the long term, you have to take the bad with the good. There will be times when you see losses. Don’t say we didn’t warn you!

Note that GMK’s Conservative fund does have a share component – we can invest up to 20% of your money in shares. So you could experience some volatility in a Conservative fund too, just not as much as in Growth.

Don't panic, it's not a life sentence!

You can change your investment direction if you want to.

So how do you decide?
 

What's your timeframe? The shorter your timeframe for needing to cash in your investment, the more conservative you should be. It’s all about volatility. Conservative investments are less volatile, so you’ll have more certainty about your account balance on cash-up day.
If you’re in Growth and need to cash up, you may have to accept a real loss if the markets are down when you need to cash up.
A rough guideline is:
  • 10 years plus: Growth
  • 3 – 10 years: Balanced
  • 1 – 3 years: Conservative
What's your tolerance for volatility?

If you’re more than 10 years out, but can’t handle the downs with the ups without losing sleep, it’s probably better for your health to move toward Balanced or Conservative. You might sacrifice a bit of growth, but you won’t have paid the price of unwanted stress.

GMK allows you to specify a custom blend of portfolios, and you can change your investment direction free of charge one a year.
 

 

Still not sure?

There is a very good online tool to help you decide on your investment risk tolerance on this page of the Sorted website.

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INVESTMENT DIRECTION OVERVIEW

This chart shows the maximum percentage of each portfolio option that we can hold in shares and bonds. We are not required to hold this percentage.

 Investment direction Equities (shares / bonds) Cash/fixed interest
Conservative
 Up to 20% Balance
Balanced (default)
 Up to 70% Balance
Growth Up to 100% Balance

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DETAILS OF INVESTMENT ALLOCATIONS

The allocation of assets in the three GMK portfolios, at 28 February 2010:

Growth Asset Allocation

 

Balanced Asset Allocation 

 

Conservative Asset Allocation 

 

 

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CHANGING YOUR INVESTMENT DIRECTION

You can change your investment direction once every scheme year (the 12 month period ending on 31 March each year) without charge. After 1 July 2010 a fee of $50 may be charged, where a member amends their investment direction more than once during a scheme year. Gareth Morgan KiwiSaver Limited may charge this fee after 1 July 2012 upon giving reasonable notice to members. You may only change your investment mandate a maximum of three times each scheme year.

Your interests in the investment portfolios will be rebalanced on a monthly basis in order to ensure that your investment is administered in accordance with the asset allocation ranges set out above. It is possible that your investment will be outside of these asset allocation ranges between the dates where the accounts are rebalanced.

How to change

Log in to your GMK member account and go to Your Personal Details page. You can make changes there.

You can also request a change in writing, either by email, by mail or fax. Include your full name and IRD number. Our mailing address is P.O. Box 10068, Wellington, 6143. The fax number is 04 473 0643.

 

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