Craigs Investment Partners, 9 November 2018
A growing number of New Zealanders are choosing to manage their own KiwiSaver investment.
Instead of the hands-off approach of mainstream KiwiSaver funds, some investors are hand-picking their investments. Doing so brings the opportunity to invest in shares or funds, or a mix of both.
DIY retirement investing isn’t new or unique to New Zealand. It’s common over the ditch and in other countries such as the United States. It’s popular with people who like the hands-on approach to their own money.
The shares versus funds conundrum
Whether to choose shares or funds for your retirement nest egg is an age old conundrum, says Mark Lister, Head of Private Wealth Research at Craigs Investment Partners (Craigs). There are pros and cons for both.
Individual shares allow investors to select specific companies and industries that appeal and give control and transparency.
On the downside, your risk can become too concentrated with money in just a few companies. It takes some fundamental know-how from you as the investor, to ensure you diversify your investments. With the support of a qualified investment adviser, diversification can be simple.
With a fund, investors get exposure to a bundle of shares of a certain flavour such as a sector, country, or level of risk. The fund is managed by specialists who diversify your investment to limit the impact of sudden shocks.
Owning funds, however, gives you less control over where your money is invested. You have to accept someone else’s decisions.
Fund managers follow the markets day in day out. This means there is always someone looking out for your investments when you’re busy, on holiday, or just looking the other way, says Andrew South, Investment Manager at QuayStreet Asset Management.
On the other hand, if you are investing directly in shares, an experienced investment adviser can help give guidance on the companies you choose, with added support from an engine room of researchers and market specialists, for you to make smart decisions.
There’s a clear argument for each. Then there’s the option of doing both; investing in a managed fund as well as hand-picking companies to create your own personal investment portfolio.
Self-select KiwiSaver – best of both worlds
Craigs offers the Craigs KiwiSaver Scheme, which lets individual investors invest in a mix of shares and funds, making it different to any other KiwiSaver provider.
“Members can choose the investments in their own KiwiSaver portfolio from more than 160 individual shares and funds. That gives them the best of both worlds”, says Lister. “It means you can have your cake and eat it too.
The investment options offered are selected by Craigs’ research team and an investment committee of specialists.
The investment options are chosen for their quality (of business and management), dividend sustainability, growth potential and price point.
Choosing from the best
It’s not uncommon for members to have half or another chunk of their KiwiSaver investment in a higher earning, diversified fund such as the QuayStreet NZ Equity Fund*. Some choose a socially responsible fund, international funds or internationally recognised exchange traded funds (ETFs), which track indexes of various flavours.
Members can choose to invest the balance in individual companies such as a2 Milk, Amazon, Apple, Auckland International Airport or shares from the remaining 25 letters of the alphabet.
A self-selected KiwiSaver portfolio suits investors who understand their own risk profile. “It gives you more flexibility because you are the decision maker”, says Lister.
Craigs offer a risk assessment, to establish your investing approach. Plus research and advice on all the investment options to help make educated, tailored investment decisions along the way.
Benefits of funds:
- Hands-off approach - good for beginners
- Immediately diversified, for less volatility
- Managed by specialists
- Decisions based on thorough research and market/company knowledge
Benefits of individual shares:
- Tailored specifically to you - selected based on personal preference and appetite for risk
- Access to investment advice on which companies suit your individual goals
- Control and transparency - you make the choices and changes
- Gain a better understanding of markets and companies