Kiwisaver / Superannuation Fund "direction"

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Forums › Finance and wealth management › Kiwisaver / Superannuation Fund "direction"

Linuxluver

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#190911 16-Jan-2016 10:41

I recently moved my Kiwisaver fund to my own bank so I can see it in my online banking. It had been with the bank of a former employer as that was where they had established it when the scheme came in. I had no visibility of it there...and effectively no control.

It's been my feeling for a while that we are in for another step down in the on-going neo-lilberal economic disaster that began in the 1980s as the effects of these policies continue to deplete wealth reserves of the middle classes of the developed world. That trend hasn't changed since the global financial crash in 2008....and if anything, has accelerated as wages flat-line while prices continue to rise.

So....what to do with my super funds? Go all out for shares? Avoid shares?

The Royal Bank of Scotland (RBS) recently advised people avoid shares completely in the coming year. It isn't about maximising returns on capital....it's now about preserving the capital itself (paraphrasing what they said).

OK.... Are they right? My sense is that they will be at least partly right. That "partly" means my share-based super funds will go down some....at least.

Those funds have only *just* returned to their 2008 values over the past year. I would have been better to put cash in a box under the bed up until mid-2015....compared to the returns I was seeing on my super funds.

I got online this morning and changed my Kiwisaver "investment direction" to cash and bonds. Avoid all shares. I've seen my super funds utterly trashed twice over the past 30 years. Not this time.

Anyone else thinking about this?

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BlinkyBill

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#1472499 16-Jan-2016 11:12

My share-based Kiwisaver has returned 45% since it started. Straight line return. If share prices fall 20% then a fund will just acquire 20% more shares for the same investment, accelerating returns on the recovery stage. Simplistic, but you get the point.

I can't comment on your specific situation, but knee-jerk fund switching is almost always a mistake, unless you get lucky. I think you have provided evidence that, although a very good move to save and invest, you really haven't taken the time to learn enough about investing and to manage your own money effectively.

Share funds are long-term investments, 10 years+. If you panic and move from share to cash/bonds based on an article that relates to foreign sharemarkets, without taking professional advice, you are almost certainly making a mistake and doing your dough. I read that article and am now considering additional share market investment in mid-2016, switching some of my safer cash and bond investments (actually I was going to do that anyway, that article is nothing new).

If you are investing money for the long term, my advice to you is seek professional advice, and without question look at a fund that has a significant share component, tracked against an index, and with a good track record. Diversification is also important. #1 thing you should do, though, is pay off debt.

The NZ market is quite well insulated against what might happen globally; so to answer your question, yes, stock markets will likely fall this year, and I would expect some impact to the NZ market, but not as much as before. Money will come to NZ, will drive up the dollar, and share market returns accordingly. But global markets will likely rebound and grow next year.

Linuxluver

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#1472507 16-Jan-2016 11:32

BlinkyBill: My share-based Kiwisaver has returned 45% since it started. Straight line return. If share prices fall 20% then a fund will just acquire 20% more shares for the same investment, accelerating returns on the recovery stage. Simplistic, but you get the point.

I can't comment on your specific situation, but knee-jerk fund switching is almost always a mistake, unless you get lucky. I think you have provided evidence that, although a very good move to save and invest, you really haven't taken the time to learn enough about investing and to manage your own money effectively.

Share funds are long-term investments, 10 years+. If you panic and move from share to cash/bonds based on an article that relates to foreign sharemarkets, without taking professional advice, you are almost certainly making a mistake and doing your dough. I read that article and am now considering additional share market investment in mid-2016, switching some of my safer cash and bond investments (actually I was going to do that anyway, that article is nothing new).

If you are investing money for the long term, my advice to you is seek professional advice, and without question look at a fund that has a significant share component, tracked against an index, and with a good track record. Diversification is also important. #1 thing you should do, though, is pay off debt.

The NZ market is quite well insulated against what might happen globally; so to answer your question, yes, stock markets will likely fall this year, and I would expect some impact to the NZ market, but not as much as before. Money will come to NZ, will drive up the dollar, and share market returns accordingly. But global markets will likely rebound and grow next year.

I guess you missed the bit about the past 30 years. What goes up most definitely does come down...and the accelerator effect you refer to works up to a point...and then all those shares drop and you're right back where you started.

Kiwisaver started in 2007. I dont' know when your fund started. I doubt you had a straight line increase through 2008-2009. But you claim you did...so..... My own funds - ASB (kiwisaver) and AMP superannuation back to the 80s - both dropped over 20% that year....and took about 6 years to recover.

In short...I've been doing just as you suggested until this morning and for me it has proven to be worse than had I just put the money in term deposits.

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BlinkyBill

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#1472532 16-Jan-2016 12:00

I started KS in 2010. I did lose money in 2008/9, as you say, but not in a KS account. I had BT funds for a while, but they didn't perform well.

I would never use a default account; I bank with Westpac, but their fund management performance isn't as good as I would like. I tend to go with more boutique providers who only manage funds - yes I understand the banks use those providers as well, probably ASB does, I don't know ASB.

My wife got great results from Fisher Funds for a while - they were picking stocks then. That's the sort of thing I mean - get some advice and get a diversified portfolio that suits your needs. I'm not recommending Fisher Funds btw, just illustrating a point.

On my own behalf I use two different boutique fund managers, am about 80% share market based, 20% bonds, and I have one cash PIE fund for emergencies and just to build up some cash. I also invest directly in some NZ companies with money I can afford to lose as I don't really have time to do the research on a company-by-company basis.

Having said all of the above, I will confess my KS is with Kiwibank via their acquisition of Gareth Morgan. GM made a currency hedging mistake a couple of years ago and I made not much return that year. But I need to be with someone for KiwiSaver, and I believe they are with the pack and ahead of many, and they have a good website and information. I am 100% growth with them, and made 40.4% simple return since 2010, -0.4% last month. This fund has outperformed benchmarks over that time, inclusive of losses.

I was just a bit alarmed that you seemed to to with your bank by default, and swapped strategy on an article, and all without professional advice.

Jase2985

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#1472542 16-Jan-2016 12:11

https://www.aonkiwisaver.co.nz/AonSaverWeb/DocsGetFileServlet?filename=doc.aon_kiwisaver_scheme_performances

thats an example of my provider and depeding on the scheme you are in depends on your results at around the 8% mark for even the most conservative of funds right up to almost 15% for aggressive stuff, thats double that of your standard cash account

some of those funds show little if any affect by the GFC.

IMO look at graphs, and performance of funds and also do some of those risk profile calculators then work out the best fund to be in. Leave it to the professionals to do the juggling of your money.

Jase2985

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#1472562 16-Jan-2016 12:25

I put $29000 in in november 2013 when i transferred from my default scheme through work which was under performing.

just over 2 years later i have $54000, mine and my employers contributions have been about $11000, the rest has been from how well the fund has been performing, and at the current level its making $7500 per year.

i just think you were in a poor/default fund.

As i get closer to retirement i will probably lessen the risk as little but thats not for like 25 years at least

timmmay

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#1472572 16-Jan-2016 12:39

I use fisher funds, they've done pretty well. Back 10-15 years ago, before kiwisaver started, they doubled my money in a year - shame I didn't put all that much in.

mdf

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#1472591 16-Jan-2016 13:24

The orthodox advice is that it depends on your investment horizon.

Historically share-based funds and indexes have consistently outperformed any other form of investment over a mid to long term investment timeframe. However, that is subject to short term fluctuations. If you are close to retirement and more interested in preserving what you have, cash and bonds is likely to better suit your investment needs.

That said, this is the standard orthodoxy. Historic returns for funds are significantly tainted by "survivorship" - basically only the funds that have actually beat the market actually survive. If bank runs fund X for a few years and it loses money, they are better off winding fund X up and starting a new fund Y from zero, rather than trying to turn fund X's negative result around. The last 100 years have also had the most significant sustained boom (post WW2 through to the oil shocks of the 70s) in human history. The 70s oil shocks, the Black Friday crash in the 80s, tech wreck at the end of the 90s/start of the noughties, and the GFC at the end of the noughties is more of a return to the pre-WW2 once-a-decade bust.

But IMHO, what that means is you actually have to think a little more about your situation and evaluate fund managers/funds/doing it yourself. In our parent's lifetimes, you could throw money at the sharemarket at random, make good returns and declare yourself the next Warren Buffet. *Everything* made money. Now we've actually got to find someone that knows what they're doing.

The other thing to watch out for is how many layers of fees you pay. But that's a separate topic/rant.

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afe66

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#1472769 16-Jan-2016 18:31

I'm not sure being easy to see balances through your bank is necessarily a good idea. If you balance is visible when looking at your cheque account balance I think you are more likely to panic when things go down.

I check my balance maybe once a year online which takes 30s.

Ignorance is bliss.

A.

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#1472777 16-Jan-2016 18:38

afe66: ... Ignorance is bliss.

... or bankruptcy

I've suffered 85% losses in two recessions. A very negative experience.

EDIT These losses were on personal investments, not a super fund.

Sideface

mattwnz

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#1472787 16-Jan-2016 18:55

A lot of it comes down to timing when to get your money in and out of the investment. So for many people it is down to luck. You don't really know when teh next financial crisis will hit. Supposedly there is going to be another big one this year, but some of the 'experts' seem to say that every year. This is why so many people put their money into housing in NZ.

Linuxluver

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#1472835 16-Jan-2016 20:45

Jase2985: https://www.aonkiwisaver.co.nz/AonSaverWeb/DocsGetFileServlet?filename=doc.aon_kiwisaver_scheme_performances

thats an example of my provider and depeding on the scheme you are in depends on your results at around the 8% mark for even the most conservative of funds right up to almost 15% for aggressive stuff, thats double that of your standard cash account

some of those funds show little if any affect by the GFC.

IMO look at graphs, and performance of funds and also do some of those risk profile calculators then work out the best fund to be in. Leave it to the professionals to do the juggling of your money.

What formed my view was the real world performance of the two funds I have.

The oldest one has grown....but if you look at the money in it...and the rate of return across all the years (including the various dips and crashes)....the actual return is about the same a term deposit (depending on where you draw the lines). In March 2009, it was down by about 25% from October 2008. It took several years just to recover that ground from the smaller base.

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Jase2985

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#1472988 17-Jan-2016 08:58

just realize you can just jump and make what i would call rash decisions based on a small dip in performance

are you in it for the long term or are you in it to take your money out in a year? if its the long term dont make knee jerk reactions to small performance dips.

BTW how old are you, what kind of fund are you currently in(conservative growth etc) and when are you planning on retiring?

http://fundfinder.sorted.org.nz/find-the-right-type-of-fund-for-you/

that's an example of a fund finder but there are plenty more there

Geektastic

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#1473059 17-Jan-2016 11:08

Jase2985: I put $29000 in in november 2013 when i transferred from my default scheme through work which was under performing.

just over 2 years later i have $54000, mine and my employers contributions have been about $11000, the rest has been from how well the fund has been performing, and at the current level its making $7500 per year.

i just think you were in a poor/default fund.

As i get closer to retirement i will probably lessen the risk as little but thats not for like 25 years at least

That is about the only downside of being self employed...!

Geektastic

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#1473062 17-Jan-2016 11:10

mattwnz: A lot of it comes down to timing when to get your money in and out of the investment. So for many people it is down to luck. You don't really know when teh next financial crisis will hit. Supposedly there is going to be another big one this year, but some of the 'experts' seem to say that every year. This is why so many people put their money into housing in NZ.

Not the only reason. Unlike many comparable countries NZ does not rebate tax on money saved for retirement, so there is very little incentive to put cash away for it.

bazzer

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#1474280 19-Jan-2016 01:23

Don't forget the old line "Past performance is not necessarily an indicator of future performance"