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New tool for KiwiSaver investors
 
Q.           I have been pleased by how fast my KiwiSaver is growing – it is now over $30,000. I have been in a conservative default fund since it started. How do I find out if it’s a good scheme? I don’t want to spend too much time thinking about my KiwiSaver. I would prefer to check it once a year and get a happy surprise. 
 
A.            Many KiwiSaver investors think of their fund as a mushroom, happily growing in the dark. Fortunately most KiwiSaver schemes are well managed and merit the faith we put in them. They have to meet quite stringent conditions and also face a fair bit of scrutiny from the industry, media and informed investors. Having said that, as fund balances grow it is important for investors to find out about the fund that they are in, how it has performed relative to its peers and whether the risk level is appropriate for them.
 
Everyone who does not select their own fund gets opted into a default, conservative fund. This may be fine for someone over 55, but younger people (who are not saving for a first home) should complete one of the many risk profile questionnaires available online. If they find they are fairly tolerant of risk, they should look at switching to a more appropriate fund.
 
There are 45 different KiwiSaver schemes and most offer a suite of funds from conservative to aggressive, giving you dozens of funds to choose from. Where to start?
 
Fortunately for investors, the Sorted website has recently launched a new tool to help with this process. It is called Fund Finder and it offers various ranking calculators. Firstly, it enables you to compare funds according to returns, service and fees. Then you can move on to the section called ‘Find the right type of fund for you’ which will help you decide where you settle on the risk scale.   The next section will identify where your current fund sits in relation to others in respect of returns, service and fees. 
 
Sorted also provides good general information about KiwiSaver, and how to go about switching. It offers a few helpful warnings such as “If you are applying for a mortgage or other loan, the lender may try to pressure you into switching to their KiwiSaver scheme. It’s unwise to do that without first checking whether the new scheme’s fees, service and investment options suit you as well as your current scheme does. A familiar brand is not a good reason to shift funds.”
 
Another word of warning. Do not try to find the fund with the highest return and the lowest fees. Actively managed funds will be more expensive to run, but they may generate higher returns than a low cost, passive fund. Compare like with like. Don’t select a fund simply on recent returns. A fund manager may have a niche speciality which has benefited from a rise in that market. A broadly diversified fund is likely to deliver more consistent returns year after year. The Sorted tool enables you to create a watchlist of funds that you want to keep an eye on, so you can spend some time thinking about your switch options.
 
The information is clearly set out and should be a help to KiwiSaver investors who want to be better informed about their savings.