Should you move your KiwiSaver between risk profiles?

According to the FMA report to 30 June 2012, there were 34,720 between investment funds in the previous year.  Of these changes, $41 million was taken out of 'Growth' (higher risk) investment funds and $36 million was added to 'Conservative' funds. $6.8 million was moved out of the 'default' scheme option.

It is important that you understand what your personal risk profile is, and that you ensure that your KiwiSaver funds reflect that risk profile.

When you join KiwiSaver, unless you choose your risk profile, you may well be automatically put into the 'active default' fund - which in most cases is more or less a 'cash' fund.  This default fund may be suitable for some people, but for most KiwiSaver members this will not be relevant for the long term of their KiwiSaver investments.

History shows that people tend to react 'after the fact' in moving their funds.  Investors with a 'growth' risk profile, may well feel that they don't have that risk appetite after markets have been down for a period of time.  The trends highlighted in the FMA report may reflect this 'human nature' risk aversion - acting after the fact.

At Moneyworks, we assist clients with understanding how markets work, and which risk profile is likely to be suitable for you.  Authorised Financial Advisers are trained to assist you with this important decision and to understand the consequences of 'knee jerk reactions' - reacting to a period of poor performance.

Moving your funds is not always the best decision.  It is important to remember that when you move your funds, the underlying investments will need to be sold and then new investments purchased, possibly incurring unnecessary transaction costs.

For more blog articles on KiwiSaver, check out these posts:

Women lag in retirement savings

KiwiSaver – How do you measure performance? – Fund Size

I’ve heard that things are changing with KiwiSaver on 1st April 2013. What are the changes?

I am under 18 and enrolled in KiwiSaver. Do I have to make employee contributions?

Are you breaking the law as a KiwiSaver Employer? -

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