Generally, most KiwiSaver providers will offer to invest your savings in a conservative, balanced, growth or aggressive fund, although there are some other more specialised ones available (e.g. real estate or Australasian equities). Each one invests in different things that have varying levels of risk.
For example, a growth fund may invest over 70% of its funds in growth assets (like shares) and therefore will have the highest risk. However, it’s likely to deliver the highest returns in the long term. A conservative fund on the other hand will likely invest 80% or more in ‘income assets’ (such as cash or bonds) and therefore carries lower risk. But it’s also likely to deliver lower returns in the long term.
Aggressive and growth funds are more volatile which mean they will go up and down more, while conservative and defensive funds won’t go up and down as much, but they also have less potential for growth.
Everyone has a different personal risk tolerance generally based on how long you will be invested for and how you are likely to behave in a downturn. It’s your choice which fund your KiwiSaver is invested in, and you can change your fund type at any time.
Pathfinder has three fund types – Conservative, Balanced and Growth. We explain the difference between them and show their rate of return here.