My Top 4 KiwiSaver Growth Funds
12 Sep, 2021
This blog post took ages to research but should make your decision around choosing a KiwiSaver fund easier.
Hopefully.🤞
This blog post title is a bold claim because the KiwiSaver market is fecking confusing. Still, I felt this was a blog that I had to write because frequently, I respond to emails or have conversations where people ask me point-blank:
“Ruth, what KiwiSaver fund should I use? PLEASE, just tell me!”
This extract from an email is an excellent example of the confusion people feel when trying to choose a KiwiSaver fund:
“I spent hours looking at different funds and found it so confusing to try to figure out actual comparisons of “apples to apples” due to the different nature of many different funds. I’m trying to work out what's better. E.g. slightly higher fee but higher return etc. Some funds only do bonds and shares, and some funds add some property and cash into the mix, so it’s a bit more diverse. So still thinking….”
I’m not surprised they are confused because I read on the Canstar website that there are 27 KiwiSaver providers in New Zealand, and between those, there are 305 different funds, all offering a wide range of options.
I am not a financial advisor.
Helping you choose a KiwiSaver fund is tricky because I am not a financial advisor. I know that I’m overstepping the FMA regulations on what does and does not constitute financial advice if I tell people to just “Choose Fund X”.
I have to be honest; it’s a bit of a pain in the tush because the people I talk to are just like YOU, just everyday people, not seeking to become knowledgeable about all the KiwiSaver options and intricacies. They just want to pick a fund, set up their contributions and get on with life, knowing that when they get to 65, there will be a decent sum of money there waiting for them. They do not want to time the market or have a specific investment mix; they just want to find a fund that they can rely on to do their honest best to grow their money.
I also find it painful that if they were to go directly to any KiwiSaver provider, the information provided is vast, confusing, and conflicting with other websites. As above, it’s impossible to compare apples with apples and I’ve gone round in circles this week trying to do just that. Epic fail.
I would like to think that I know a thing or two about KiwiSaver, but while researching this blog post and moving through so many provider websites and Instagram posts, I was left a bit bamboozled too.
I wish KiwiSaver were like clothes shopping. I don’t want to do it, but I know I have to once or twice a year. So, I walk into ONE shop (quickly done in a small town like Alexandra), pray that there is a decent staff member on (there always is) and ask, “I need a new outfit, I don’t care what, just one that looks appropriate for my age, size and the event I’m attending, can you sort me out please”? Which they do. I pay the bill, walk out and don’t give it another thought.
Many people want to pay the same level of attention to their KiwiSaver and feel sure they will still have a good retirement. They are not entirely hands-off and are prepared to put in a little learning upfront, but they want to automate it and move on with their year. It’s entirely possible. It should be easy to do.
Finding the needle in the haystack.
BUT finding that fund is like finding a needle in a haystack, and when I repeatedly tell people to “go to the Sorted Fund finder and compare your fund with others”, it feels like a cop-out. And the research I’ve been doing over the last week to find some ‘good’ KiwiSaver funds has made me realise more than ever how hard that search is. Sure, you can use Google to search “best KiwiSaver fund, “ but the company paid advertising is the first thing to hit you. Or you might end up on a comparison site, not realising that if you click a link, they will get paid a fee, which is hardly impartial advice. It’s in their best interests to only offer you choices that they clip the ticket on. Plus, there are many KiwiSaver ‘best in show’ awards out there, and all providers have marketing departments who can cherry-pick an area of their fund and proclaim it to be #1 for XYZ.
A selection of just some of the awards given to KiwiSaver providers.
Then the variables of a fund are diverse and hard to compare:
Number of members in a fund
Fund $ size
Fund category - Conservative, Moderate, Balanced, Growth, Aggressive, Cash, Fixed Interest, International Share, Property Australasian Equity
Fees charged - Anywhere from 0.30% - 1.90%
Returns of the fund over multiple periods
Returns calculated before or after fees and taxes
Fellow Happy Savers, I hear you! It’s hard to choose a KiwiSaver fund.
I have been wracking my brains about providing a resource that will help you narrow down your choices, pick a fund, sign up, always contribute and get on with life. I’ve taken a “what would Ruth do” stance if someone told me I HAD to switch from my current fund (Simplicity Growth) to another.
I would feel comfortable with any of these listed below if I had to make a change.
After searching high and low and trawling countless websites, I’ve settled on these four Growth Funds. One helpful comparison tool I’ve used to compare apples with apples is the Fund Updates that each provider publishes for every fund.
ASB KiwiSaver Growth Fund Update - Management Fee: 0.70% - Annual Membership: $30
BNZ KiwiSaver Growth Fund Update - Management Fee: 0.58% - Annual Membership: $0
Simplicity KiwiSaver Growth Fund Update - Management Fee: 0.30% - Annual Membership: $20
Superlife KiwiSaver Growth Fund Update - Management Fee: 0.61% - Annual Membership: $30
They are passively managed funds meaning the fund managers are not constantly guessing what the share market or the investment mix might do, so they are cheaper to run and charge fewer fees. Plus it has been proven by SPIVA that passively managed investments outperform active investments over time.
But before you click away from this blog post, there are a few things I want you to consider first.
My rule of thumb is this:
Most of us should be in GROWTH FUNDS because we are ten plus years out from 65 years old. Even those nearing retirement or already in it can still have their KiwiSaver in a Growth Fund. It’s not like you will blow the whole lot in one year once you get access to it, is it? If you stay in a growth fund and pull out a little each fortnight to top up your super, then that leaves the majority of your money still invested and growing over time. If you retire at 65 and plan to live to 100, well, that’s 35 years to be in the share market and being in a growth fund will take advantage of that. Don’t be too cautious. Please do take a bit of time to read more on my blog about structuring ALL of your money to set yourself up for retirement.
If the market drops, so what!
Focus on the climb, not the fall, and you will see that the share market climbs more than it falls!
If seeing the balance of your KiwiSaver drop gives you the heeby-jeebies, you have two options:
Don’t look at your balance
Move to a lower risk moderate fund from the beginning
I do Option 1. Just know that if you are in a diversified KiwiSaver Growth Fund, and you just leave it be, it will make up its lost ground over time. As above, most of us have plenty of time.
Active and Passive
An active manager (that you will pay higher fees to) “may” outperform the average in the short term, but they can’t keep it up over the long term, and KiwiSaver is a long term investment for sure. That’s why I always recommend the book The Simple Path to Wealth by JL Collins, which shows that you are financially better off being a passive investor over time.
Fees matter…
This example is a bit rough and ready, but you will get the idea. Think about fees this way:
If KiwiSaver Fund A provided a 12-month return of 5% and their fee was 1.5%, then my return is only 3.5%.
If KiwiSaver Fund B provided a 12-month return of 5% and their fee was 0.5%, then my return is 4.5%.
Which returns sound better to you?
Low fees mean you get to keep more of YOUR money so that your fund will grow faster.
We need to stop thinking of fees relative to a Briscoes sale offering 50% off. In comparison, a mere 1%-2% fee from your KiwiSaver provider sounds ‘meh’, but over the life of your investment, it’s HUGE. HUGE! Over the life of your investment, fees can eat up a considerable chunk of your returns and paying higher fees does not equate to higher returns over time.
Good enough is close enough.
Don’t angst over your KiwiSaver decision for too long. In the rest of our lives, we make decisions based on feeling, instinct, the opinion of others, maths and common sense. Yet when it comes to KiwiSaver and other forms of investment, we feel we have to be perfect, that we have to “optimise”, we have to make every single cent count.
Take that pressure off yourself.
That pressure is being put on you by the finance industry who are vying for your investing dollar. Find a fund with low fees that has a passive investing style and the right level of exposure to equities (or risk) and which has a platform and communication structure that you understand. Then just start investing (consistently and regularly) and review once a year.
You might be an outlier.
Some people enjoy delving into intense detail when it comes to choosing their KiwiSaver fund, and they feel they are beating the market by picking and choosing the makeup of their fund. If that’s your thing, then enjoy yourself and comment below if I’ve missed anything out, but for the majority of us, making a choice from a bunch of good choices is enough, and you should feel confident about your decision.
Some readers will see my suggestions above and say I’ve not gone far enough, that I should be finding the most aggressive fund I can for the ultimate in long term growth (that’s a common complaint about the fund in which I invested). I’m perfectly OK with that. But you know what? I have investments outside of my KiwiSaver that are more aggressive. Good financial management is about finding a balance. Your balance.
Ask your friends what KiwiSaver fund they use!
I’m pretty open about sharing my financial journey and invite you to take from it what you will (my KiwiSaver update is below). I KNOW that by being honest about my finances, so many people, often for the first time, get an insight into how someone else handles their money and they just use me for comparison. Ask your whanau and friends who they invest with and why. Some will be quite clear on the choice they have made. Others will say, “I dunno”, but hearing about other people’s KiwiSaver will help you decide on your own. And if your friends have no idea WHO their fund is with, tell them to call 0800 KIWISAVER to find out.
Now’s time to “Do your research.”
What I want you to do with this information is go to the Sorted Fund finder and compare the funds above with the fund you are currently with. Just take a look. How do you feel about the fact these are growth funds? Why not complete the find the right type of fund for you quiz while you are there and that will help you settle in on the appropriate level of risk for you. What’s the same between your fund and these? What is different? Then go to the website of each fund and have a read of the information they provide. Watch their videos. Use the calculators. If you have questions, then email or phone them and ask.
MoneyHub offers an excellent website for researching and you will also find some good KiwiSaver conversations on the Cooking The Books podcast too.
Once you are comfortable, go ahead and sign up.
Let me know if you found this helpful.
Hopefully, I’ve helped you narrow down your options, and if you add my suggestions to what your whanau, friends and colleagues are investing in, you have some real-time data of your own to make a comparison.
Just for the record, I have zero affiliate relationships with any provider mentioned here, so you can be confident that I’m not recommending these for my own financial gain. And to be perfectly honest with you, I don’t enjoy giving free publicity to these huge providers either. HOWEVER, I do enjoy helping you narrow down your search, so that’s why I’m happy to post this.
Make a decision and get on with your life.
KiwiSaver is often the only investment people have, so it’s not surprising that we feel overwhelmed with choice when forced to pick a provider. I am humbled that people feel that they trust me, this random woman on the internet, and if I can just point them in the right direction to check out some options, they can go away, do their research, and make a more enlighted call.
Which I consider a win, having everyone in a scheme with which they feel comfortable.
My KiwiSaver Fund Update
And for the record, here is my KiwiSaver update, I just ticked over the $100,000 mark, which is pretty darn exciting. Not bad for someone who has worked part-time or not at all for the last 13 years. The key is that I’ve never missed an opportunity to contribute to my fund whether it be via my employer and employee contributions or from voluntary contributions. If I can manage this, what can you achieve?:
A spanner in the works.
And finally, given that I am a member of Simplicity, I thought it would be interesting to hear what CEO Sam Stubbs would choose if I asked him the question of “if you had to choose any fund, other than Simplicity, what would it be”? So, I rang him up. Well, this low fee passive fund manager CEO threw a spanner in the works when he said: Milford Active Growth Fund - It is actively managed, with a higher fee but with a long track record.
You can be pretty sure that this is not what I expected to hear!
Why share this? Because it just goes to show that your KiwiSaver choice is unique to you, based on your own knowledge, experience and investing timeframe.
Ultimately: You do you!
If you have anything useful to share, please let me know in the comments below. Thank You!
