Investment funds are becoming more and more popular with Kiwi investors. They make becoming an investor really easy because you can get the benefits of a professionally managed investment portfolio without having to do all the detailed work yourself.
When you join an investment fund, you become an investor in some of the very best local and international companies, including brands you may well use on a daily basis.
Should I consider an investment fund?
Knowing where and how to invest isn’t always straight forward. One way to invest is via an investment fund. When you use an investment fund you won’t be left all alone having to navigate the complexities of investing – instead you’ll benefit from the expertise and experience of the investment team managing your fund.
Investment funds vs KiwiSaver
Similar to a KiwiSaver fund, an investment fund will usually invest the fund into a mix of shares, bonds, and cash across local and overseas markets, and will be managed by a professional fund manager.
By placing some of your lump-sum savings (or making regular contributions) into an investment fund you can benefit from the fund’s diversification, the skill and track-record of the investment team and the power of compounding investment returns, just like you do with your KiwiSaver fund. But unlike KiwiSaver, you can make regular withdrawals before the age of 65.
Bear in mind however, most investment funds will have a minimum recommended investment timeframe you should commit to in order to give yourself the best chance of achieving your goals.
How to choose an investment fund
There are three key factors you should consider when choosing which fund – or funds – you want to invest your money in.
Your goals – Maybe you’re saving for retirement or maybe you’re already in retirement and need to draw an income from your investment. Whatever you have planned, it’s important to have a think about your personal goals before investing your money.
Your timeframe – How long do you plan to invest for and when do you think you’ll need to begin making withdrawals? Investment funds can go up and down in value, so it’s important to be clear when you’ll need to access your investment. Some funds are designed for shorter-term goals, like drawing an income to cover your expenses and others are designed for longer-term goals, like growing your savings for retirement. Knowing your timeframe will help you choose a fund that’s right for you.
Your risk tolerance – All investment funds can go up and down, but some fluctuate more than others. If you’re a more conservative investor, a lower-risk fund will grow your savings at a slower pace, but without the major peaks and troughs of a more aggressive growth fund. If you’re looking for higher returns, then you’ll need to be comfortable investing in a higher-risk fund and be prepared to handle more ups and downs along the way. You can find more detailed information about this on your fund manager’s website.
Don’t worry if you’re not sure how to answer some of those questions. At Milford, they’ve created a Digital Advice tool that can help you choose the right Milford Fund for your situation. You can start with as little as $1,000. It’s very easy to use and is a really great way to help you invest with confidence.
This article is intended to provide you with general information only. It does not take into account your objectives, financial situation or needs and should not be viewed as financial advice. Past performance is not a reliable indicator of future performance. Please read the relevant Milford Product Disclosure Statement as issued by Milford Funds Limited here. Before investing you may wish to seek financial advice. For more information about Milford’s financial advice services, see here. Please note Milford’s Digital Advice Tool covers a selection of Milford Investment Funds.