News & Updates
Is now a good time to switch your KiwiSaver?
Tue Nov. 22nd 2022
You may have heard a drumbeat of advice about your investments, to sit tight during this falling share market. “Don’t switch.” “Don’t lock in your losses.” This advice is about ensuring investors don’t switch out of a growth or balanced fund to a conservative fund just because the value has fallen. It is good advice.
The reason is that we can’t predict the timing of shifts in the market – the drop in share prices during the COVID downturn was six months whereas after the Global Financial Crisis it was five years. If you switch to a lower risk fund when the market is about to rise, you lock in the losses and miss out on some of the price recovery. So, it is better to stay invested in the risk category you have chosen.
But this doesn’t mean you shouldn’t change your KiwiSaver account to a better fund within the same risk category. You won’t lock in your losses if you shift from a growth fund to a different growth fund, for example. You can switch your KiwiSaver provider (it’s free to do so) to find a better fund. For many Kiwis, that will mean finding a more ethical fund.
Here are five reasons you should review your investments and think about finding a more ethical fund.
1. Ethical funds have been doing well financially, showing resilience during the downturn.
There is mounting evidence showing that investing with social, environmental and governance criteria not only reduces risks but also delivers higher returns. Recent data from the Responsible Investment Association of Australasia shows higher returns for ethical funds across almost all investment categories and timeframes.
2. By investing ethically, you can avoid your money being used for investments that you would want to avoid.
Did you know your KiwiSaver fund could be invested in fossil fuels, weapons, companies that violate human rights or companies that test their products on animals. This information on where your money is invested is available for free below
3. There’s a climate emergency.
You can invest in funds that are taking action to avoid investing in fossil fuels, engaging with companies to improve their performance and investing in climate solutions. For most Kiwis, the carbon emissions in your investments are the biggest part of your carbon footprint.
4. You can invest in companies that invest at least part of your funds in doing good.
Despite some examples of greenwash, you can invest in KiwiSaver and investment providers that are serious about ethical investment. They avoid harmful companies, push companies they invest in to raise their standards and they invest in positive outcomes - social housing, renewable energy, gender equality and basic needs in poorer nations.
5. Use this opportunity to check that your funds are invested in the right risk category.
The fund that you are invested in should reflect issues like when you will need the funds and how tolerant you are to volatility (the value of your funds falling for an unknown period). Check out your risk profile on the Mindful Money Fund Finder or the Sorted website.
Invest ethically. You can feel good about your investment, do well financially and do good for people and the planet. What is there not to like?