Milford KiwiSaver financial adviser Liam Robertson helps a reader prepare for a comfortable retirement.
Q: I’m in my mid-40s and have saved $5000 towards my retirement. How can I maximise my returns?
A: If you’re wanting to grow your money, it’s not enough to simply save it. You need to
If you’re already contributing enough in KiwiSaver to maximise your employer and the government contribution, then it could make sense to invest any additional money into an investment fund. It’s just like a KiwiSaver fund, because you get all the benefits of a professionally managed, diversified portfolio managed by a team of investment experts, except you get to access the money at any time should you need it. And with Milford, you can start an investment fund for as little as $1000.
If you’re feeling unsure, it might be worth considering getting financial advice, which is much easier to get nowadays. For instance, with Milford, you can use our Digital Advice tools to help you work out the appropriate Milford Investment Fund (or Milford KiwiSaver Fund) for you based on your risk tolerance and time frames — and then let Milford’s expert investment team do the heavy lifting and detailed work managing the portfolio on your behalf.
When considering what investment strategy may be appropriate for an investor, we consider factors such as their goal, risk tolerance and timeframe. Timeframe is very important as, generally speaking, the more time you have available, the more risk you can consider taking on. Over the long term, we would expect a growth fund to outperform a lower-risk, conservative fund. However, we would also expect the growth fund to be more volatile over that timeframe. A longer timeframe allows an investor to ride out these bouts of volatility and benefit from higher average, long-term returns.
KiwiSaver is great as it can “save us from ourselves”, i.e., the funds can generally be accessed only for a first home or in retirement. This means that as long as we continue to contribute and invest, there will be a nest egg available to us in the long term, as we can’t give in to temptation and raid the fund in the short term (should we want the money for other things).
However, it can be beneficial to have access to funds should we need them for things like early retirement, helping our kids, or emergencies in general. Spreading investments across both KiwiSaver and investment funds gives us the best of both worlds. Long-term security and liquidity.
As for the sort of returns you can expect, it really depends on what sort of fund you choose to invest in. Sorted.org.nz has a great calculator which can assist in forecasting future returns. For example, they assume that a conservative fund will generate returns of 2.5 per cent p.a. (after fees and tax) while an aggressive fund will generate returns of 5.5 per cent p.a. (after fees and tax). Although, with an aggressive fund, you will experience greater volatility along the way.
We encourage investors to check their position every 12 months or so to ensure that their investments are still appropriate (i.e., suitable based on their goal, risk tolerance and timeframe). Day-to-day and month-to-month involvement is not required because Milford is actively managing the fund. Our investment team takes great care in managing the portfolios in order to try and mitigate downside risk and maximise upside potential as markets change.
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Advertise with NZME.We also provide a lot of communication to our clients via webinars, blogs, stock stories, reports and data in their mobile app and online portal so that they are kept fully informed as to the progress of their investments.
Liam Robertson is a KiwiSaver financial adviser at Milford.
This article does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment of financial advice. Past performance is not a reliable indicator of future performance. Investment involves risks and returns can be negative as well as positive. Milford Funds Limited is the issuer of the Milford KiwiSaver Plan and Milford Investment Funds. Please read the relevant Milford Product Disclosure Statement at Milfordasset.com. Before investing you may wish to seek financial advice. The disclosure statements for all Milford financial advisers contain more information and are available on request, free of charge. See our Financial Advice Disclosure Statement at Milfordasset.com/getting-advice.
