Some basic things that are useful to know before you invest are:
You can use this website to invest responsibly. The Fund Finder gives to options to avoid pollution and exploitation and, instead, invest in companies with high social and environmental standards. And research shows that, on average, returns are likely to be as high or higher than traditional investing. See Responsible Investment more information.
This website isn’t giving you financial advice about which investment to choose – only information that will help you make sound decisions. If you’re not sure, you should contact a financial advisor.
There are a few steps you should consider before investing. A good source of information is the government's Sorted website.
You probably have several financial accounts. Before you start investing, Sorted suggests that you may want to pay off high interest debts (like credit cards). Also plan carefully.
That’s not always easy to do, but have an idea of what you are investing for – whether it is to buy your first home, for retirement, or for your kid’s education. If you’re in a relationship, it’s good to do this together! This gives you an idea of how much you want to invest, for how long, and how much risk you may want to take on (more risk generally means a higher return). It is important to set aside money regularly.
When you invest, your money can fund companies through buying their shares (risky but higher returns) or lending them money (less risky, lower returns). It can also be held in a bank (even less risky but very low returns). You need to feel comfortable with the risks you are taking and the returns you are likely to get. This platform has a Fund Finder that enables you to work out your preferred level of risk. You can use that to match to the type of Kiwisaver fund.
If you don’t choose a provider, Inland Revenue will assign you to one of the nine default KiwiSaver schemes. These are generally balanced funds (ie. medium risk and medium returns).
It is easy to switch KiwiSaver funds. You can use the Fund Finder on this platform, If you want to switch to a different provider, Mindful Money will provide you with a link to their website, fill in the form and it’s done. Your new provider will tell Inland Revenue and arrange for your money to be transferred. The process is really quick online. It takes 10 to 35 days for the funds to be moved into your new KiwiSaver.
Being prudent means taking the time to find out about the options and only investing when you have carefully considered your options.
Investments are often put into different categories, depending on the level of risk:
If you are young and saving for the long term, you may choose to accept higher risks (on the basis that the highs and lows even out over time). Those who are approaching retirement generally prefer less risk, to ensure their savings are protected. The level of risk affects your expected returns.
Past returns are not necessarily a guide to the future. We have seen downturns and crises before, in New Zealand as well as globally, and there are no guarantees that share prices will continue to rise, or that loans or bonds will produce positive returns. And for those put off by the potential risks of financial investments, it is important to understand that there are also risks in non-financial investments, notably housing. House prices can go down as well as rising (and periodically have).
