Evaluating Risk Tolerance: A Crucial Step in Choosing KiwiSaver Funds

Evaluating your financial risk tolerance is an essential step in making any kind of financial investment, especially when you’re doing something as important as saving up for retirement. In New Zealand, KiwiSaver is a popular way for people to set themselves up for a secure future.

Before you choose your KiwiSaver plan or financially invest in anything else, it’s vital that you understand your own risk tolerance. This will help you make good choices and manage your risk without putting yourself in serious financial danger.

What Is KiwiSaver?

In essence, KiwiSaver is a voluntary savings plan that’s designed to help Kiwis save up for retirement. It’s a long-term scheme that offers a range of helpful benefits, making it a very valuable retirement planning tool. Unfortunately, many people nowadays aren’t prepared for their retirement years. Even if you’re not going to retire for decades, starting to save for retirement now can greatly help you down the track. 

But before you choose your KiwiSaver plan, you need to understand the different kinds of opportunities you have - this includes conservative, balanced and other kinds of funds. Different plans have different levels of risk, so certain plans may be suitable for you. 

What To Do When Managing Your Risk Before Choosing Your KiwiSaver Funds

When assessing your risk tolerance, the best thing you can do to properly analyse your finances is to work with a qualified financial adviser. An experienced NZ financial adviser can provide you with valuable insights into the best opportunities in New Zealand, including KiwiSaver funds, investment opportunities and more. 

Financial matters can be confusing and undoubtedly very stressful, as money is something that most people worry about. However, by taking the right actions, you can set yourself and your family up for a stable future. A financial adviser can analyse your finances with you, letting you further understand the big picture of your situation. Then, you can understand what you should do, what you shouldn’t do and how you can reach your long-term financial goals. 

When speaking with your trusted financial adviser, it’s vital that you stay open and honest about your finances so that they can guide you in the right direction with pertinent advice and helpful information. 

To understand your risk tolerance better, talk about the following with your financial adviser: 

Assess Your Risk Tolerance. Discuss the ways you can assess your risk tolerance with your NZ financial advisor. There are a few methods, ranging from relatively simple to complex, and you can explore the best ways to assess your own. 

It’s essential to understand that risk management isn’t about avoiding or eliminating risks entirely because it’s often impossible to eliminate all risks when making any kind of financial decision. Rather, risk management is more about understanding your particular risks and how you can mitigate them.

Evaluating your risk tolerance involves understanding your willingness and ability to withstand changes in the value of your investments. Talk to your financial adviser about your long and short-term investment goals, your overall financial situation and how comfortable you are with certain financial challenges and investment opportunities. 

When looking at your potential investments, goals and KiwiSaver options, remember to stay positive, patient and realistic. You may not be able to reach all of your goals overnight, but you can steadily make progress towards them through smart decisions. 

Discuss The Importance Of Diversification. Diversifying your KiwiSaver portfolio across different kinds of assets can help mitigate risk. Essentially, diversification is where you spread out your investments so that no one investment is too significant for your finances. If you metaphorically put all of your financial eggs in one investment basket, then you may be in trouble if something bad happens with that investment. 

Instead, you can consider various investment options with varying risks to find the right balance for you. Some funds may offer higher potential returns, but they may be riskier. Others may not be as rewarding, but they could be more stable and reliable. 

Regularly Review Your Financial Plan And Investments. Once you’ve worked out your KiwiSaver plan and your investment portfolio with your financial adviser, your work doesn’t end there - you need to routinely review and adjust your finances as needed. 

Life circumstances change, so your goals today may not be the same in a few months. Be sure to regularly review your KiwiSaver and investment choices with your financial adviser to see if they still align with your goals and your risk tolerance. If they don’t, you can adjust them to improve your chances of meeting your objectives. 

Assessing Your Risk Tolerance And Making Good Financial Choices In NZ

Finances can be confusing and stressful, but managing them well is an important part of taking care of yourself and your loved ones. Luckily, you don’t have to do it alone - we at Future Wealth are here to help. We have various services designed to help people just like you, including help with KiwiSaver and investments.

Would you like to talk to our specialists? Contact us on 027 628 8010 or through our website to get in touch.

Set yourself up for a comfortable future with help from Future Wealth.