So you’ve been saving hard to buy a house. You’ve controlled your spending, put in more time at work, and invested aggressively in KiwiSaver. It’s your first home so you plan to use KiwiSaver’s first home withdrawal to help reach your deposit amount.
Finally, after all your hard work, it’s time to buy a house. You go in to check your KiwiSaver balance only to find that your balance isn’t enough to help with your deposit. What happened? And where did it go wrong?
It’s all about timing
Everyone is at a different financial stage of their lives. This means there is no one size fits all when it comes to devising a strategy on how to invest in KiwiSaver. However, if you are planning to buy a house, one variable that remains important to consider is the timing of your house purchase.
A general assumption is that the closer you are to wanting to buy a house, the less risk you should have in your KiwiSaver account.
If your KiwiSaver strategy is not aligned with your goals of buying a home, you may lose out on thousands. In the situation above, the negative outcome was likely to be the result of investing too aggressively at the wrong time. If you invest too aggressively prior to buying a house, you may see your KiwiSaver investment fluctuate and be more sensitive to market swings.
Although growth KiwiSaver funds have higher expected returns than more conservative KiwiSaver funds, growth funds also have greater volatility. Being in a KiwiSaver fund that is too aggressive before buying a house can have disastrous effects. It could see your KiwiSaver balance drop just as you are planning to buy a house. If your KiwiSaver fund type is less risky, your account balance will have less of an impact from market conditions and unexpected global events. This is why National Capital believes personalised KiwiSaver advice is so important.
How we can help
So when exactly should you move from a growth fund to a more conservative fund? National Capital’s professional financial advisors can help answer these tricky questions for you.
We take into account many factors that contribute to a personalised KiwiSaver strategy. Factors such as your cash flow, risk tolerance, and when you want to buy a home are considered when constructing your KiwiSaver strategy.
So if you are planning to use KiwiSaver to help put down a deposit on a home, please make sure that you're in the right KiwiSaver fund to be on track to reaching your goals. Start your journey by completing the KiwiSaver HealthCheck.
