Scheme-weaver: How to get your KiwiSaver right for life

Article written by InvestNow – 22nd December 2021

Over 3.1 million New Zealanders are now KiwiSaver members but perhaps only a minority have established a strategy designed to fit their individual goals.

With KiwiSaver assets set to grow into an ever-more substantial component in the financial lives of New Zealanders, however, the hands-off attitude to long-term savings strategies is likely to change.

The InvestNow KiwiSaver Scheme was established in 2020 to help fill this need, giving Kiwis greater flexibility in how they manage what for many will be the biggest financial asset of their lives.

There’s more to choosing a KiwiSaver scheme (or underlying funds) than brand, fees and recent performance – you should also consider factors such as personal timeframes and targets, management style (for example, passive or active) and risk exposure.

Importantly, too, any long-term KiwiSaver plan should include a regular review as not only can your needs and circumstances change, but also the performance of your investments may differ from what was originally expected.

While tweaking KiwiSaver funds every day in reaction to market conditions is not recommended, it’s worth reviewing settings at least once a year to ensure the scheme matches the dream.

And with 2021 about to check-out, now is a good time to check-in on your KiwiSaver fund to ensure it’s fit-for-purpose after a year of changes.

Background material: markets on edge

Compared to the spectacular 2020 that saw both the sharpest share market drop since the global financial crisis (GFC) and the quickest rebound in history, the current year has been more subdued for investments.

Figures from consultancy firm Mercer, for instance, show NZ share markets were flat for the 11 months to the end of November 2021.

Over the same period, however, broad global equity indices rose more than 20% in unhedged terms for Kiwi investors.

On the downside, local bond markets fell between 5 to 7.5% during the calendar year to November 30 while international fixed income benchmarks also dipped slightly into the red (-0.2 to -1.1%).

Growth-focused and balanced fund investors would still be well ahead over the year-to-date – albeit amid increasing volatility in the final months of 2021.

Rising inflation and the threat of higher interest rates (realised in NZ, at least) have shaken both share and bond investors alike.

While the year-end turbulence might be discomforting, KiwiSaver members should consult their long-term plan for guidance on how to handle the new conditions: for some that might mean making a few portfolio adjustments; for others, it could be just business as usual.

Checks and balances: cut the cloth to suit

Rather than leave the decision entirely to gut feel, InvestNow KiwiSaver Scheme members can follow a few simple steps to perform an annual health-check for their InvestNow KiwiSaver Scheme portfolios, including:

1. Revisit your investment beliefs
Investing is about more than number-crunching. Even the largest professional investors (such as the NZ Superannuation Fund) take time to think about their underlying beliefs, asking questions like: 

  • Is low-cost passive management always the most appropriate way to invest? Can active managers add value? Or is it best to use a mix of index and active funds depending on the asset class? 
  • How much diversification is enough?
  • Does sustainable investing matter? If so, is it better to invest in funds that screen out ‘bad’ companies or with those that work with firms to improve corporate behaviour? 

The answers, of course, will vary according to each individual but they can put investment strategies on a sounder footing. Read widely – InvestNow, for example, has a growing resource of market insights, research, etc., from fund managers, to inform the search;

2. Reset your goals
Things change. Career, family, health, personal and financial circumstances are all constantly evolving. Investment goals should move in line with the shifting life dynamics. Will you have enough to buy your dream first home as planned? Is retirement looming closer than you thought?

Goal-setting helps clarify why you are investing and what the next steps might be;

3. Review risk tolerance
Spoiled by two years of mainly smoothly rising markets, some investors might have forgotten risk exists. But increasing volatility, as well as other changes in personal circumstances, could make many rethink what type of investor they really are: use the Sorted ‘Investor kickstarter’ tool to recalibrate your risk tolerance;

4. Revise your asset allocation
Investment beliefs and lifestyle goals will both influence your asset allocation within your portfolio (simply, the mix of growth versus conservative assets you own), which requires regular reviews to stay in synch. A place to start could be our ‘InvestNow KiwiSaver Scheme Getting Started Guide’.  Whilst it is currently positioned as a tool for new InvestNow KiwiSaver Scheme investors, the context and content are equally relevant to someone already on the way with their investment journey. 

5. Rebalance your portfolio
The nitty-gritty buying and selling of funds in your portfolio follows on from the previous steps. Does the risk profile of your existing portfolio match the asset allocation, arrived at after considering investment beliefs and life goals? If not, which funds do you need to buy or sell? 

The differing performance of investments over time can also skew portfolios away from your asset allocation – regular rebalancing may be necessary.

6. And don’t forget the housekeeping tasks
One thing that can often be overlooked, is keeping your personal details up to date. Login to your InvestNow KiwiSaver Scheme account and make sure your personal details are correct. This includes your PIR rate, phone number, address, email, etc.

Tools to help 

InvestNow has a range of sophisticated tools to help InvestNow KiwiSaver Scheme members: 

Scheme-weaver: How to get your KiwiSaver right for life

Article written by InvestNow – 22nd December 2021

Over 3.1 million New Zealanders are now KiwiSaver members but perhaps only a minority have established a strategy designed to fit their individual goals.

With KiwiSaver assets set to grow into an ever-more substantial component in the financial lives of New Zealanders, however, the hands-off attitude to long-term savings strategies is likely to change.

The InvestNow KiwiSaver Scheme was established in 2020 to help fill this need, giving Kiwis greater flexibility in how they manage what for many will be the biggest financial asset of their lives.

There’s more to choosing a KiwiSaver scheme (or underlying funds) than brand, fees and recent performance – you should also consider factors such as personal timeframes and targets, management style (for example, passive or active) and risk exposure.

Importantly, too, any long-term KiwiSaver plan should include a regular review as not only can your needs and circumstances change, but also the performance of your investments may differ from what was originally expected.

While tweaking KiwiSaver funds every day in reaction to market conditions is not recommended, it’s worth reviewing settings at least once a year to ensure the scheme matches the dream.

And with 2021 about to check-out, now is a good time to check-in on your KiwiSaver fund to ensure it’s fit-for-purpose after a year of changes.

Background material: markets on edge

Compared to the spectacular 2020 that saw both the sharpest share market drop since the global financial crisis (GFC) and the quickest rebound in history, the current year has been more subdued for investments.

Figures from consultancy firm Mercer, for instance, show NZ share markets were flat for the 11 months to the end of November 2021.

Over the same period, however, broad global equity indices rose more than 20% in unhedged terms for Kiwi investors.

On the downside, local bond markets fell between 5 to 7.5% during the calendar year to November 30 while international fixed income benchmarks also dipped slightly into the red (-0.2 to -1.1%).

Growth-focused and balanced fund investors would still be well ahead over the year-to-date – albeit amid increasing volatility in the final months of 2021.

Rising inflation and the threat of higher interest rates (realised in NZ, at least) have shaken both share and bond investors alike.

While the year-end turbulence might be discomforting, KiwiSaver members should consult their long-term plan for guidance on how to handle the new conditions: for some that might mean making a few portfolio adjustments; for others, it could be just business as usual.

Checks and balances: cut the cloth to suit

Rather than leave the decision entirely to gut feel, InvestNow KiwiSaver Scheme members can follow a few simple steps to perform an annual health-check for their InvestNow KiwiSaver Scheme portfolios, including:

1. Revisit your investment beliefs
Investing is about more than number-crunching. Even the largest professional investors (such as the NZ Superannuation Fund) take time to think about their underlying beliefs, asking questions like: 

  • Is low-cost passive management always the most appropriate way to invest? Can active managers add value? Or is it best to use a mix of index and active funds depending on the asset class? 
  • How much diversification is enough?
  • Does sustainable investing matter? If so, is it better to invest in funds that screen out ‘bad’ companies or with those that work with firms to improve corporate behaviour? 

The answers, of course, will vary according to each individual but they can put investment strategies on a sounder footing. Read widely – InvestNow, for example, has a growing resource of market insights, research, etc., from fund managers, to inform the search;

2. Reset your goals
Things change. Career, family, health, personal and financial circumstances are all constantly evolving. Investment goals should move in line with the shifting life dynamics. Will you have enough to buy your dream first home as planned? Is retirement looming closer than you thought?

Goal-setting helps clarify why you are investing and what the next steps might be;

3. Review risk tolerance
Spoiled by two years of mainly smoothly rising markets, some investors might have forgotten risk exists. But increasing volatility, as well as other changes in personal circumstances, could make many rethink what type of investor they really are: use the Sorted ‘Investor kickstarter’ tool to recalibrate your risk tolerance;

4. Revise your asset allocation
Investment beliefs and lifestyle goals will both influence your asset allocation within your portfolio (simply, the mix of growth versus conservative assets you own), which requires regular reviews to stay in synch. A place to start could be our ‘InvestNow KiwiSaver Scheme Getting Started Guide’.  Whilst it is currently positioned as a tool for new InvestNow KiwiSaver Scheme investors, the context and content are equally relevant to someone already on the way with their investment journey. 

5. Rebalance your portfolio
The nitty-gritty buying and selling of funds in your portfolio follows on from the previous steps. Does the risk profile of your existing portfolio match the asset allocation, arrived at after considering investment beliefs and life goals? If not, which funds do you need to buy or sell? 

The differing performance of investments over time can also skew portfolios away from your asset allocation – regular rebalancing may be necessary.

6. And don’t forget the housekeeping tasks
One thing that can often be overlooked, is keeping your personal details up to date. Login to your InvestNow KiwiSaver Scheme account and make sure your personal details are correct. This includes your PIR rate, phone number, address, email, etc.

Tools to help 

InvestNow has a range of sophisticated tools to help InvestNow KiwiSaver Scheme members: 

Login to your InvestNow KiwiSaver Scheme account