Matching Fund Type to Financial Goals
Finding the right fund type is crucial because it directly impacts how well your savings meet your financial goals. Each fund type comes with its own level of risk and return, so aligning your fund choice with your personal goals and timeline can make a big difference in achieving your financial goals.
Key Factors: Timeframe and Risk Tolerance
Two main things to consider when choosing a fund are your timeframe and risk tolerance. The table below illustrates which fund types are typically more suitable for specific risk profiles and timeframes.
What If You Have Multiple Financial Goals?
Good question! Most people, especially as they approach retirement, have a mix of goals. In this case, using a range of fund types is often the way to go.
Case Study
Imagine you’re about to retire in 3 years with $280,000 in your KiwiSaver fund. You plan to withdraw $1,000 a month to top up your pension.
You might think a conservative fund is the best fit since you're nearing retirement, but that’s not necessarily true. Since you’ll be withdrawing funds over time, it’s smart to use a mix of fund types.
How to Split Your $280,000:
15% in Conservative Fund: That’s $42,000 in a low-risk, low-return fund. This portion is your safety net for short-term needs.
50% in Balanced Fund: Invest $140,000 here. This fund works harder for you over a medium timeframe (5-7 years). This money will come into play after the conservative funds are used up.
35% in Growth Fund: Put $98,000 in this higher-risk, higher-return fund. This portion will grow over a longer period (a decade or more), making the most of its growth potential.
Disclaimer: This is Not Financial Advice
Remember, this example is for illustrative purposes only. Your situation is unique and may require a personalised strategy.
Our team of KiwiSaver experts is ready to help you find the best approach for your needs. And the best part? Our advice is free! Interested? Fill out the form below, and we’ll get in touch with you soon.
Navigating the Sea of KiwiSaver Funds
With over 300 KiwiSaver funds available, choosing the right one can feel like navigating a vast ocean. That’s why we recommend seeking expert advice to help you find the perfect fund tailored to your needs. Let’s make sure you’re on the right course for your financial journey!