In today’s world, we’re surrounded by choices – from what to eat for breakfast to which tie you should wear to your cousin’s wedding. The same goes for your KiwiSaver account. With more than 300 fund options¹ on offer across dozens of KiwiSaver providers, it can be a little overwhelming.

Choosing to opt into KiwiSaver is one decision. Deciding which provider to invest with is another. Then comes one of the most important choices of all – selecting the right type of KiwiSaver fund. You’ve probably heard terms like growth, balanced, or conservative thrown around, but what do they actually mean for you?

To help make sense of it all, we’ve created a three-part series on the main fund types: conservative, balanced, and growth. Each plays a different role in building your long-term wealth. Let’s start with conservative funds.

What you need to know about conservative funds
Conservative funds are designed for people who want stability above anything else. They aim to preserve your money and provide steady returns, rather than chasing higher growth. That’s why they’re generally considered lower risk.

A typical conservative fund invests:

• 80% to 85% in fixed income assets such as bonds, term deposits, and savings accounts
• 15% to 20% in shares – often in large, established companies

Many people think conservative funds avoid shares completely, but that’s not the case. They often include shares in companies involved in the utilities, infrastructure, or telecommunications sectors – but specific holdings vary by provider and can change over time.

For investors, these companies sometimes pay dividends – small payments made to shareholders from a company’s profits. While dividends aren’t guaranteed, they can provide a steady stream of income, similar to earning interest from a bond or term deposit.

These shares can also offer the potential for capital growth, which helps the fund preserve the value of investors’ capital over time.

Things to consider: The pros and cons
As with any investment, there are things to consider when assessing your options, such as your risk tolerance, investing timeframe, and financial goals. Here’s how conservative funds stack up against the other fund types we’ll be covering – balanced and growth.

The pros of conservative funds

• Lower volatility and less risk of large swings
• More predictable, steady returns
• Reduced exposure to major market downturns

The cons of conservative funds

• Lower long-term growth potential compared to other fund types
• Inflation risk, as rising costs can outpace returns over time

Because conservative funds are less exposed to short-term market shifts, they can be better suited to people with a shorter investment timeframe and a lower risk threshold, like retirees who value capital preservation and more steady returns from their savings , or first-home buyers who plan to use their KiwiSaver soon.

The Milford difference
At Milford, we believe choosing the right fund for you is one of the most important decisions you can make for your financial future. A conservative fund may be a good fit if stability is your priority. But if your goals or timeframe are different, another fund type may suit you better.

That’s why we offer free, no-obligation KiwiSaver advice, even if you’re not a Milford client. You can also explore your options with our online digital tool*.

Part two of this series will look at balanced funds and how they aim to strike the middle ground between stability and growth.

¹ www.canstar.co.nz/kiwisaver/new-zealands-top-10-kiwisaver-schemes

*The Milford KiwiSaver Plan digital advice tool is not suitable for persons aged 65 or older.