You can DIY your KiwiSaver, but should you?
Photo:
RNZ
More KiwiSaver schemes allow investors to choose their own investments - but should you do it?
This week, Sharesies expanded its 'self select' KiwiSaver option to include US shares and exchange-traded funds. Members can now add more than 150 New Zealand and US investments to their KiwiSaver portfolios, alongside 'base funds'.
Up to half a KiwiSaver member's plan can be allocated to their own investment picks, with a maximum of 5 percent in each pick.
To varying degrees, Craigs Investment Partners, NZ Funds, Nikko, InvestNow, Kernel and KiwiWRAP also allow investors to select where their money goes.
Sharesies super and funds general manager Matt McPherson said investors said they wanted more connection and control over what was available.
"People who want to take some of the control, but not all of it are who we're building for."
He said about 40 percent of Sharesies KiwiSaver members had some of their own picks and about 10 percent of their contributions going into those.
He said the most popular self-select pick was the S&P500.
"What people like about that is that it's very low cost and it's very passive."
Investments in big global brands were also proving popular, such as Microsoft, Apple and Amazon. Each stock was in its own pie fund for Sharesies investors to simplify tax considerations.
Genesis Advice financial adviser Edward Glennie said it was sensible for KiwiSaver schemes to have limits on how much choice investors could have,
"If you're allowed to put 100 percent on one particular stock, that might compromise your returns, particular if you're unadvised."
He said he would work with clients through KiwiWRAP to help them set up a suitable portfolio.
Self-select options could sometimes have higher costs, but he said that was probably the direction the market was headed. It also allowed people to get away from the 'one manager' model that had been dominant since the scheme launched 18 years ago.
"I think the market is gradually opening up."
Data director Greg Bunkall said it was difficult to anticipate most individuals outperforming fund managers with their own picks.
"In Australia, studies comparing self-managed superannuation fund (SMSF) portfolios with APRA-regulated funds present mixed results, with superior returns observed among SMSFs that possess substantial balances and leverage the expertise of financial advisors in their decision-making processes."
McPherson said the option would not be the right thing for all investors.
"Fund managers do great work of finding undervalued companies and investing in them, so that's why the product is built around this idea of, if you want to, you can do a bit of it, as opposed to having to take on all the responsibility."
McPherson said Sharesies' model was more like the self-directed options seen in Australian, than full self-management.
Kernel Wealth founder Dean Anderson said members could "mix and match" from Kernel's 21 funds.
"We've found overall investors are very informed, with fund selection often reflecting an investor's age and life stage. Of course, Kernel isn't a default provider, so investors have typically made an educated decision to move to us and have realised the benefits of being engaged with their KiwiSaver.
"Consistently outperforming the market over time is incredibly challenging, but KiwiSaver members, who customise their plans, often have a specific purpose in mind. Some may want 100 percent of their KiwiSaver invested in global shares, others might prioritise values by choosing ESG-centric funds or they could be aiming to diversify away from other assets they own, selecting funds that balance their overall wealth.
"As investors approach the time to access their KiwiSaver, the self-select function becomes even more valuable. They might start to bucket their assets-moving funds for the first few years of retirement spending into a cash fund, while keeping another bucket in higher-growth assets to support their financial needs 10, 20 or even 30 years down the line.
"This flexibility is incredibly useful, rather than being forced to only be in one strategy."
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