5 min chat: David Beattie – should I change my KiwiSaver fund?

24 March 2020

Clearly there’s a lot going on in the world at the moment. There’s a lot to take in – not least how it all affects your KiwiSaver investment or any other investments you may have. It’s not easy watching your account balance go south; believe me, I know – mine’s dropped heaps as well.

But I’m not planning on switching. Why not? Well, as I can’t officially withdraw my KiwiSaver savings for another 12 years, and nothing else in my life has changed, the fund I chose before the markets started dropping is still valid.  Also, if I was going to try and ‘time the market’ for my benefit, my KiwiSaver investment is not the right type of investment to do this with.

I sat down with David Beattie, Principal, to help explain why.

  • So just to be clear, do you think people should be switching funds right now?

As a general rule, no. Hopefully, people were already in the right fund before the current volatility started and understand that their KiwiSaver investment is an investment for the long term.

The important thing to realise, is if your KiwiSaver investment is currently in a growth fund and you switch to a conservative fund now, you may miss out on seeing the up side when the markets recover.

  • What do you mean when you say ‘you may miss out on seeing the up side’?

Growth funds are mostly made up of investments that fluctuate in value but trend upwards. Right now, they are fluctuating down.

Conservative funds are mostly made up of investments that don’t fluctuate as much. The trade-off is they don’t grow as much. If you switch out of a growth fund while your balance is down, your new conservative fund won’t bounce back up when markets recover.  You will have missed out on the upside. You will sometimes hear this referred to as ‘locking in your loss’.

  • What opportunities can you miss out on?

For long term investors, this volatility could be seen as a great opportunity from a long-term perspective. With KiwiSaver, you make regular contributions and right now those contributions are getting more bang for their buck.

Think of it like this: Let's say that shares in a company usually cost $1 each. If market dips mean those shares are now worth 80c each, your contribution will buy you more shares.

  • So people should just wait it out - no matter what?

If you are in the right fund and can wait it out, then history shows us that markets will recover, so it’s probably a good choice.  In saying that, no one knows exactly how long it will take for markets to recover so you need to have patience.

On the other hand, if you need to withdraw your KiwiSaver balance soon and you think you might be in the wrong fund, the best thing you can do it sit down and work it through with a professional.

We can help with that. If people find themselves in that situation, they can give us a call and we will connect them with a financial adviser.


By Matthew Savage

Communications Manager - Booster