This FAQ addresses common client questions about recent investment performance, portfolio construction, and Milford’s long-term investment approach. It provides explanations of how portfolios are managed and how performance should be assessed
over time.
Recent market gains have been driven by a handful of large US tech and AI companies. Our portfolios are deliberately spread across many different investments, rather than relying heavily on any one sector. This means they may not rise as quickly when a small group of companies is leading the market, but the aim is to reduce risk and deliver more consistent
returns over time.
Higher returns can come with higher risk. While some parts of the market can deliver impressive gains, they can also be more volatile and experience sharper falls. Our investment approach aims to provide sustainable long-term growth by carefully managing risk and maintaining a diversified portfolio.
By investing across a wide range of assets, diversification helps reduce the risk of having too much riding on any one investment or sector. While this approach may not capture all the gains when a handful of companies are driving the market higher, it can provide greater protection when markets become more volatile. That’s why diversification remains an important part of a long-term investment strategy.
A single stock can deliver spectacular gains, but it can fall just as sharply when momentum turns. A diversified fund is designed for steadier, risk-managed progress over time, rather than relying on the fortunes of a single company.
It can be tempting to think investors should jump in and out of markets to avoid downturns and capture gains, but consistently getting the timing right is very difficult. What looks obvious after the fact is rarely clear at the time. That’s why we focus on a disciplined, longterm approach rather than trying to predict short-term market movements. By staying invested and sticking to a consistent strategy, portfolios are better positioned to work toward their long-term goals.
Record highs usually refer to one market, for example the US S&P 500. Other markets, including the UK, Australia and New Zealand, may not be rising at the same time. A diversified KiwiSaver fund holds a mix of investments across markets and asset classes, so its balance rarely mirrors a single headline index.
The S&P 500 tracks large US companies only. A diversified fund also holds assets from other regions, smaller companies and often bonds, so it will rarely match a single share index over any given period. That is not a like-for-like comparison, and diversification is the reason for the difference.
Market concentration means a small number of companies make up a large share of an index. In the S&P 500, the ten largest stocks account for nearly 40% of the index at the time of publishing. That means index performance is increasingly driven by a relatively small number of companies. The fewer companies driving returns, the greater the concentration risk.
Not necessarily. A diversified fund is built to manage risk across a full market cycle, not to track a single index. When gains are concentrated in a narrow group of stocks, a diversified fund can lag behind. That doesn’t mean the strategy isn’t working; it simply reflects the role diversification plays in managing risk and pursuing stable long-term returns.
Index funds and ETFs are low-cost and designed to track an index wherever it goes. An actively managed fund has the flexibility to take a different approach when the investment team identifies risks or opportunities that may not be reflected in the index. Which approach is right for you depends on your goals, timeframe and tolerance for risk.
It’s generally better to compare the benchmark and objective of Funds against your own goals and timeframe, rather than this quarter’s hottest index. The better questions are whether you are on track to reach your long-term financial goals, taking the level of risk best suited to your tolerance, and able to stay invested during the inevitable ups and downs. Our tools and advisers can help, or you can speak with your own financial adviser.
Milford’s investment philosophy remains centred on delivering sustainable, long-term returns with controlled risk, aligned to client objectives rather than market speculation.
