Why Growth fund's can pay off over the long-term



One of the most important decisions you can make when setting up your KiwiSaver account, is
deciding what kind of fund to invest in.

Different funds offer different levels of risk and potential returns. Generally, the more growth-orientated a fund is, the higher the risk and higher the potential returns over the long term. Whereas more conservative funds offer lower-risk investments, but are also likely to have
comparatively lower returns.

The Generate KiwiSaver Scheme has five fund options, including:

-       Focused Growth Fund

-       Growth Fund

-       Balanced Fund

-       Moderate Fund

-       Conservative Fund

-       Defensive Fund

Our growth funds, the Focused Growth and Growth Fund, are worth considering for your KiwiSaver account, if you are a long-term investor, as there are a number of potential benefits. Keep reading to find out more.

5 reasons why growth funds can be great options for long-term KiwiSaver investors.

1.    Growth funds have the potential for higher returns:

Our Growth funds are invested in companies and sectors that we see as having strong growth potential over the long-term. This may be due to emerging technologies, changing consumer preferences, or other market dynamics. As these companies expand and increase their profits, we anticipate their stock prices may rise, which would be reflected in your KiwiSaver account returns. However it’s important to remember that good things take time! And while we see growth potential in these investments, we‘re realistic about the time it may take to achieve this growth. 

2.    Long-term KiwiSaver investors have the benefit of “time in the market”. 

The longer your KiwiSaver account is invested, the more time it has to grow. However, it’s important to remember that growth isn’t always linear, and while history shows that and while funds usually trend upwards over the long-term, they can go up and down along the way. This is why Growth funds are generally suited for KiwiSaver investors who expect to stay invested for eight years or more, as any short-term dips can be offset by the long-term growth.  

3.     Take advantage of compounding returns to maximise your investment:

By staying invested for an extended period, KiwiSaver investors can benefit from the power of compounding returns; this is where their initial investment, as well as any gains made along the way, can generate returns on top of returns.

4.     Diversification:

Generate’s growth funds are invested in a diversified portfolio of growth-oriented companies. Diversification helps spread risk since the performance of individual stocks can be offset by the better performance of others in the portfolio.

5.     Professional management:

All of Generates funds, including our growth funds, are professionally and actively managed by our team of Portfolio Managers, who actively select stocks and investments with growth
potential. These fund managers conduct research and analysis to identify companies that they believe will outperform the market. 

Despite their potential benefits, it’s important to remember that growth funds also come with risks.

Growth funds will be more volatile than conservative funds, and returns can be positive and negative. If you are looking to buy your first home or you are nearing retirement and plan on withdrawing your KiwiSaver savings within the next few years, we would recommend choosing a more conservative fund, as it is less likely to be impacted by market volatility.

You should carefully consider your risk tolerance, investment goals, and time horizon before choosing to invest your KiwiSaver account in a growth fund. We recommend talking to a KiwiSaver adviser to make sure your KiwiSaver account settings are best suited to you.

For a no-obligation advice meeting, contact us.