Tom Hartmann, resident blogger at sorted.org.nz , recently posted about comparative risks in investment decisions. Specifically he looked at the classic ‘now risk’ vs ‘later risk’, or how “taking greater risks now means reducing them later, and vice versa: taking too small a risk now means it will loom larger down the line.”
With KiwiSaver, fund managers present these risks in different investment profiles from which the investor can choose to suit his or her preference. So growth assets like shares and property typically have greater returns in the long run but tend to have more volatility along the way than income assets like bonds or cash.
But for many investors the greater ‘now risk’ in the short term is outweighed by the ‘later risk’ of not having enough to reach their investment goals.
As Hartmann concludes: “Most of us have an allergy to risk – we naturally tend to put it off for the future. Somehow we need to overcome that.”
A discussion with us about your investment goals and our recommendations on how best to achieve them is a good place to start.