What KiwiSaver Members Need to Know
Sharesies has introduced a new investment option for KiwiSaver members, giving them direct access to individual US stocks and a new US500 fund.
This move provides exposure to the Vanguard S&P500 ETF, representing the 500 largest US-listed companies across various sectors.
Key Takeaways
- Evaluate Risks and Benefits: Consider whether the flexibility of Sharesies' new options aligns with your financial goals and risk tolerance.
- Stay Diversified: Ensure a balanced approach to reduce risks associated with market volatility or sector-specific downturns.
- Leverage Professional Advice: Consult with a financial advisor to optimise investment strategies for retirement savings.
While this development opens up new investment opportunities, KiwiSaver members should carefully consider the implications for their retirement savings. Here’s what you need to know:
Key Features of the New Offering
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US500 Fund:
- The fund is linked to the Vanguard S&P500 ETF, offering diversified exposure to the largest US companies
- Sectors represented include technology, healthcare, finance, and more, providing broad market coverage.
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Individual Stock Investments:
- Members can directly invest in US stocks such as Meta and Apple
- A cap of 5% is applied to investments in any single stock to reduce risk.
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Portfolio Requirements:
- At least 50% of the investor’s portfolio must remain in base funds
- Contributions can be split across multiple base funds for added flexibility.
Investment Guardrails
Sharesies has implemented rules to safeguard retirement savings:
- The 5% single-stock limit prevents over-concentration in one company
- Base fund requirements ensure a foundational level of diversification.
Trends Among KiwiSaver Members
- Approximately 44% of Sharesies KiwiSaver members currently engage in self-selected investments
- Early indications suggest a strong appetite for US stocks and ETFs, with an estimated 20% of investment volume likely to be self-selected under the new options.
Risks of Self-Selected Investments
Investors choosing to pick individual stocks should be aware of the risks:
- Diverse Outcomes: Self-selected portfolios often experience greater variability compared to professionally managed funds
- Over-Concentration: Concentrating investments in a single sector or company can expose portfolios to significant risk
- Limited Expertise: Without professional guidance, investors may inadvertently make decisions that hurt long-term retirement goals.
The Importance of Diversification
Experts emphasise the role of diversification in reducing investment risk:
- Managed funds typically spread investments across industries and regions, balancing risk and return
- Self-managed portfolios should aim to avoid placing "all eggs in one basket," particularly when retirement savings are at stake.
However, these options may not suit everyone, particularly those with limited financial knowledge or who prefer a hands-off approach.
KiwiSaver members must remain strategic in their investments, balancing potential returns with the security of their retirement funds. Sharesies' new offerings provide exciting opportunities, but careful planning is essential to harness their full potential responsibly.
For more information, visit Sharesies KiwiSaver or consult a certified financial advisor. Read more »
Related reading: Sharesies launches new US500 fund for KiwiSaver members »
