Welcome to your investor update. This series is to keep you up to date on the scheme, the markets, and investment topics to help you get the most out of your KiwiSaver investment.
In this edition, we are talking about the value of financial advice and how it can help you reach your goals faster.
What’s the Value of Advice?
Financial advice is the core of what we do here at Lifestages.
We know financial advice really makes a big difference to long-term outcomes for our members. However, sometimes it can be hard to put a finger on exactly how much of a difference getting the right advice at the right time can make for an individual.
The latest research from Russell Investments suggests that, over a decade, the value of advice, on average, is about 0.59% per year – almost 6% over the course of 10 years – an investor (Russell Investments 2023 Value of an Adviser Report).
In short, this number represents the cumulative benefit of: Active Portfolio Rebalancing, Behavioural Coaching, Personalised Planning, and Focusing on Real Returns.
Active Portfolio Rebalancing
Rebalancing is the act of buying and selling investments to bring your portfolio back into line with a target allocation. This needs to be done as, over time, some investments will grow faster than others which can mean your portfolio becomes riskier than you originally intended. We rebalance your investments every year to keep your risk profile in check and make sure you are not taking on more risk than you intended.
Behavioural Coaching
When the investment markets are choppy and you see your balance drop significantly, it's natural to want to reduce your risk profile. This often leads to worse long-term investment returns, even if it does feel a little more comfortable in the short-term, because you ‘sell low’ and end up ‘buying high' when the eventual market recovery occurs. Your Lifestages advisers are always on hand to talk through your options and make sure we find the best option for your overall needs.
Personalised Planning
Getting personalised advice (advice that takes your specific situation into account) is very difficult without speaking one-on-one with an adviser. A Lifestages adviser takes information that can’t be neatly fitted into a calculator or equation and interpret it so it can be a part of your financial plan. Having a fuller picture of your personal situation helps to ensure your investments are appropriate and maximises your chance of achieving your goals.
Focusing on Real Returns
Real returns are your investment returns minus inflation. This is obviously very topical now with inflation running historically high and, in some cases, eroding real investment returns – particularly for Term Deposits. Advisers can help ensure your investments are making positive real returns (i.e. stop your savings from devaluing) by recommending investment options that are keeping pace with inflation.
Performance Overview
The Lifestages Auto Options invest in combinations of the Lifestages High Growth Fund and the Lifestages Income Fund in proportions that vary in accordance with pre-selected age bands. These options automatically adjust the risk profile of your investment by altering the proportions invested into the funds based on your age.
Performance as at 30 September 2023.
| Fund Option | 1M | 1Y | 5Y |
| High Growth Fund | -4.11% | 12.93% | 5.24% |
| Auto 0-49 Option | -4.11% | 12.93% | 5.24% |
| Auto 50-54 Option |
-3.51% |
10.66% | 4.36% |
| Auto 55-59 Option | -2.90% | 8.41% | 3.39% |
| Auto 60-64 Option | -2.29% | 6.17% | 2.38% |
| Auto 65+ Option | -1.99% | 4.86% | 1.66% |
| Income Fund | -1.08% | 1.75% | 0.23% |
For more information about how performance is calculated and more performance periods, click here.
Market News
After strong gains for equities in the first half of 2023, investment markets declined in September, making it two consecutive monthly falls this year. The catalyst for these falls is the realisation that interest rates are going to be “higher for longer”. This had a negative impact on both fixed-interest and equity investments. Housing data continued to show low demand. Consumer spending concerns also increased, as excess savings (from the pandemic) were depleted, with consumers having to draw down on credit facilities if they wished to continue their spending spree.
While this news is not good for investment markets in the short term, there should be long-term benefits for both bonds and equities in 2024. Current higher short-term interest rates are constraining economic activity and reducing inflationary pressure as required.
Year-to-date (ytd) equity markets are still positive, although down on their July highs. The Lifestages High Growth Fund is up 12.93% over the past 12 months and the Income Fund 1.75% for the same period.
