Kiwis Are Moving Towards Growth Funds - Should You?
More Kiwis than ever are choosing growth funds for their KiwiSaver investments. In fact, growth funds now hold 46% of all KiwiSaver funds, up from just 26% in 2014. So, what’s driving this shift, and should you consider switching?
Why Are More Kiwis Choosing Growth Funds?
The answer is simple: higher potential returns over the long run. Growth funds typically invest more in shares and other high-growth assets, which means they come with more ups and downs but tend to perform better over the long term.
The data shows this shift happening:
In 2014, only 23.1% of KiwiSaver funds were in growth portfolios.
In 2024, that number has jumped to 46% - nearly doubling in 10 years.
Conservative fund holdings have dropped from 39.3% to just 19.5%.
This shift suggests that more investors are realising that playing it too safe can actually be risky in the long run, especially when it comes to growing your KiwiSaver balance for retirement.
The importance of a higher equity allocation
Why consider investing in a fund with higher allocation to growth assets?
Equities (growth asset) tend to outperform other asset classes, such as bonds or cash, over the long term. While shares can be more volatile in the short term, investors with a long horizon have the advantage of riding out market fluctuations and benefiting from the higher potential returns that equities offer.
The longer the investment period, the more time the money has to grow. A higher allocation to shares, which historically yield higher returns, will allow savings to compound more effectively over time.
Investors with a long investment horizon have the luxury of time to recover from any market downturns.
Regular contributions to investments allow for dollar-cost averaging, when markets are down investors buy more shares at lower prices, and when markets rise, the value of existing shares increases.
You can read our full blog here on the importance of a higher equity allocation.
Who should Be in a Growth or Aggressive Kiwisaver Fund?
Investors with a long time horizon (10+ years) – If you’re far away from retirement, growth funds historically provide the best long-term gains.
People comfortable with short-term volatility – These funds experience ups and downs, but they reward patient investors.
Those looking to maximise retirement savings – Over time, higher returns compound significantly, leading to a much larger KiwiSaver balance.
Who Should Be Cautious?
Retirees or those close to withdrawing KiwiSaver funds – A market dip before retirement could impact your savings.
Investors who panic-sell during downturns – Growth and Aggressive funds require patience and discipline to ride out market fluctuations.
Not sure if you should be in a high growth or growth fund? Take our KiwiSaver Discovery Quiz for a personalised KiwiSaver recommendation.
Need to Make the Switch?
Many Kiwis are still in default funds or funds that don’t match their goals. Is the fund you’re in appropriate for your investment timeframe and KiwiSaver goals or do you need to make a change?
If you have a long investment horizon, a growth fund could be a game-changer for your KiwiSaver balance. More Kiwis are making the switch - you could too! Complete our KiwiSaver discovery quiz and we will compare providers and funds in a complementary report.
Data sourced from the KiwiSaver Annual Report 2024.
Compound Wealth are based in Mount Maunganui, Tauranga and offer KiwiSaver, Investment & Retirement Financial Advice to clients all over New Zealand.
