Every investor should have a goal in mind – whether it’s saving for a first home, planning for retirement, or simply building long-term wealth. The question is: how much risk are you willing to take on to get there?

That’s where your choice of KiwiSaver fund comes in. Growth, balanced, and conservative funds each take a different approach to risk and return, and understanding those differences can help you make smarter long-term decisions.

This is the final article in our three-part series on KiwiSaver fund types – breaking down the unique role each fund type could play in shaping your financial future. In part one, we looked at conservative funds and how they focus on stability. In part two, we explored balanced funds, which aim to strike the middle ground between growth and income. Now, we turn to growth funds.

What you need to know about growth funds
Growth funds are designed for people who are investing for the future and willing to ride out short-term ups and downs for the potential of higher long-term returns. Because returns can be more volatile over shorter time periods, the goal of a growth fund is to pursue long-term capital growth.

A typical growth fund invests:

• 20% to 25% in fixed income investments such as bonds, term deposits, and savings accounts
• 75% to 80% in shares across a range of sectors and regions

Earlier in this series, we looked at how conservative funds often include income-oriented shares that pay regular dividends – small payments made to shareholders from a company’s profits. Growth funds take a different approach. They focus on growth-oriented shares – companies that reinvest profits to expand their business, rather than paying them out as dividends .

These types of shares have the potential for greater price appreciation over time but can be subject to more volatility. Sectors such as technology, healthcare, and renewable energy often include these kinds of companies, but specific holdings can change over time.

Things to consider: The pros and cons
It’s easy to assume growth funds are only suitable for young investors, but that’s not always the case. While they do suit those with a longer investment horizon and a higher appetite for risk, they can also play a role for older investors who have other sources of income or don’t need to access their KiwiSaver savings for several years.

The pros of growth funds
• Higher long-term return potential compared with lower-risk fund types
• Suitable for long-term goals such as retirement or building wealth over time
• Exposure to innovative sectors and companies that can drive portfolio growth

The cons of growth funds
• Higher chance of short-term ups and downs, which can be uncomfortable
• May carry higher fees depending on the provider and investment strategy
• Not suited to investors with short investment timeframes or low risk tolerance

A growth fund can be a good fit if you’re focused on long-term outcomes, comfortable riding out short-term market movements, and have an investment horizon of around seven years or more. The key is finding the right balance for your goals, your situation, and your comfort with risk.

The Milford difference
Choosing the right KiwiSaver fund is one of the most important decisions you can make for your financial future. At Milford, our focus is on disciplined active management, diversification of assets, and helping you match your fund choice to your goals and timeframe.

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*.

That’s it for our three-part series on KiwiSaver fund types. We covered conservative funds for stability and income, balanced funds for a middle-ground mix of growth and security, and growth funds for long-term potential. If you missed the earlier articles, take a look at parts one and two for the full picture.

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