KiwiSaver is a voluntary saving initiative to help set you up for retirement. KiwiSaver has been designed to supplement the government’s retirement income support and to reduce the burden on the public pension system.
The latest FMA KiwiSaver report showed that the fees associated with KiwiSaver have experienced an 8.1% decline. People have also become more active due to the significant growth of KiwiSaver’s investment profile, resulting in a shift from conservative to balanced funds in standard settings.
KiwiSaver Volatility Impact on Investment
Over the last few years, the KiwiSaver landscape has experienced a notable shift towards growth. The total Funds Under Management (FUM) increased by $4 billion, reaching $93.7 billion in March 2023, despite the negative investment return.
Volatility is often associated with higher risk and greater return; during times of high market volatility, the performance of KiwiSaver investment may fluctuate significantly, resulting in both positive and negative movement in their value. Volatility can provide opportunities for KiwiSaver providers to buy assets at a lower price and sell them at a higher price, generating higher returns. However, when people encounter short-term declines in their investments, they often react by moving their money, which can lead to significant setbacks if they sell at a low point due to panic. Therefore, KiwiSaver Providers must understand the risk associated with volatility to avoid making a rash decision based on short-term fluctuation.
The Resilience of KiwiSaver
KiwiSaver’s design is to withstand market volatility by providing a diversified portfolio of assets. KiwiSaver uses diversification in your investment, spreading it across different types of assets such as shares, bonds, and property. This strategy helps mitigate the impact of market fluctuations. Moreover, KiwiSaver offers a wide range of investment options, which people can choose based on their risk tolerance and financial goals.
The key to resilience in KiwiSaver is KiwiSaver provider investing in a diversified portfolio. And selecting the right funds for their clients to help ensure that client’s funds are well-positioned to withstand volatility and deliver long-term growth. National Capital CEO Clive Fernandes expresses his view that ”it is crucial to emphasise spreading investment across different asset classes to minimise the impact of volatility on the overall portfolio.” At National Capital, we assist our clients in choosing the right KiwiSaver provider and fund that aligns with their objectives, needs, and financial circumstances.