Investment funds are becoming more and more popular with Kiwi investors. They make becoming an investor really easy because you can get the benefits of a professionally managed investment portfolio without having to do all the detailed work yourself.

When you join an investment fund, you become an investor in some of the very best local and international companies, including brands that you may well use on a daily basis.

Should I consider an investment fund?

Life is full of things that cost money and finding space to save for your future can be a slow and frustrating experience. Investing your money can help you grow your savings. But knowing where and how to invest isn’t always straight forward.

One way to invest is via an investment fund. Investing this way means you won’t be left all alone having to navigate the complexities of investing – instead you’ll benefit from the expertise and experience of the investment team managing your fund.

Investment funds vs KiwiSaver

As with a KiwiSaver fund, an investment fund will usually invest the fund into a mix of shares, bonds and cash across local and overseas markets, and will be managed by a professional fund manager. In some cases, the exact same fund you’re investing in for KiwiSaver, may also be offered by your KiwiSaver provider as an investment fund.

By placing some of your lump-sum savings (or making regular contributions) into an investment fund you can benefit from the fund’s diversification, the skill and track-record of the investment team and the power of compounding investment returns, just like you do with your KiwiSaver fund. But unlike KiwiSaver, you can make withdrawals when you need to.

Bear in mind however, that most investment funds will have a minimum recommended investment timeframe you should commit to in order to give yourself the best chance of achieving your goals.

How to choose an investment fund

There are three key factors you should consider when choosing which fund – or funds – you want to invest your money in.

Your goals – Maybe you’re saving for your first home, or for a big trip away. Or maybe you’re just starting early to ensure you have the best possible nest egg for later in life. Whatever you have planned, it’s important to have a think about your personal goals before investing your money.

Your timeframe – How long do you plan to invest for and when do you think you’ll need to begin making withdrawals? Investment funds can go up and down in value, so it’s important to be clear when you’ll need to access your investment. Some funds are designed for shorter-term goals and others are designed for longer-term goals. Knowing your timeframe will help you choose a fund that’s right for you.

Your risk tolerance – All investment funds can go up and down, but some fluctuate more than others. If you’re a more conservative investor, a lower-risk fund will grow your savings at a slower pace, but without the major peaks and troughs of a more aggressive growth fund. If you’re looking for higher returns, then you’ll need to be comfortable investing in a higher-risk fund and be prepared to handle more ups and downs along the way. You can find more detailed information about this on your fund manager’s website.

Okay – you may be thinking, that sounds like a lot of work and I’m not really sure how to answer those questions. At Milford, we’ve created a Digital Advice tool that can help you choose the right Milford Fund for your situation. You can start with as little as $1,000. It’s super easy to use and is a really great place to start your investment journey.

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