How to choose the right investment fund

If you’re just starting out, or are looking to change up your portfolio, we break down the 7 investment fund types available through MAS to help you make the right decision for your finances. 

Every investor is different, with their own approach to their finances, their own ambitions, and their own appetite for risk. High returns are the dream, of course, but they are seldom achieved without higher risk. Many people are not big fans of risk when it comes to their hard-earned cash and are therefore prepared to accept a lower expected return for less stress. Others, however, are actively seeking a high rate of growth and don’t mind taking on the risk of a loss, especially if they have plenty of time to ride the potential ups and downs. If you’re looking to invest and wondering what type of investment fund to choose, here are 7 fund types available through MAS and some key things to consider before making a decision 

Cash Fund 

Firstly, it’s important to ask yourself how long you intend to invest for, as this will affect the type of fund you should choose. If it’s a short-term investment, for example, for a year or so, then a fund with low volatility could help reduce the risk of experiencing significant losses over a short period of time. In this instance, a Cash Fund could be a good choice. A cash fund invests in a range of cash and cash equivalent investments and aims to achieve stable returns over the short term. While no investment is entirely risk-free, a cash fund can offer relative stability during periods of market volatility. 

Conservative Fund 

If you’re thinking of investing for around 3 years, then a Conservative Fund may be a good option. This fund is most suited to investors who want to take a more cautious approach and accept a smaller amount of investment risk to potentially achieve a more stable return. It invests mainly in income assets with a modest allocation to growth assets, and aims to preserve capital while providing a steady return over the short to medium term. This could be a good option for those approaching retirement, or if you have a specific goal you’re working towards, like buying a house or paying for university fees. 

Moderate Fund 

If you’re happy to leave your money invested for 4 to 6 years, then you might be willing to take some more risk in order to potentially see greater growth in that time. A Moderate Fund gives you a little more potential for gains. This type of fund seeks to strike more of a balance between stability and the potential for investment growth or returns, compared to more conservative options like a Cash Fund. This is due to its exposure to a mix of asset types (such as equities and bonds). 

Balanced Fund 

Beyond that, if you’re OK with some fluctuation, then a Balanced Fund is a good option. A balanced fund can be most suited to investors who are prepared to accept a medium level of investment risk to potentially achieve a medium return. It invests mainly in growth assets with a moderate allocation to income assets. If you’re not chasing the highest possible returns, but you’re also not content with the lower expected returns of a moderate or conservative fund, a balanced fund can be the sweet spot. This could be a good option for young people starting out on their investment journey. 

Growth Fund or Aggressive Fund 

If you’re committed to investing for a longer period of time, say 10 years or more, and are prepared to accept a higher level of investment risk to potentially achieve a higher return, then you could consider a Growth Fund or Aggressive Fund. MAS’s Growth and Aggressive funds invest mainly in growth assets, 80 and 95% respectively, with a smaller allocation to income assets. 

Global Equities Fund 

Those who are comfortable with a high degree of risk could consider a single-sector investment fund, like MAS’s Global Equities Fund, which usually invests entirely in growth assets and aims to provide higher returns over the long term. This is for people who are investing long-term and who are looking to maximise their returns, accepting the inherent risk that comes with this approach.  

It's also important to remember that you can spread your money across a range of funds, which can potentially lower the overall risk and ups and downs in your investment portfolio while aiming for more stable returns over the long term. 

Check out our Fund Finder to find out what kind of investment fund could be suited to your personal situation and investment objective.  

Chat with a MAS Adviser 

Everyone’s financial journey is different, and we’re here to help our investors create the financial future that is right for them. Our MAS Advisers can help you with your investment decisions, at no additional cost. If you would like to chat with a MAS Adviser, phone 0800 800 627 or email info@mas.co.nz. 

This article is of a general nature only and is not intended to constitute financial or legal advice. MAS is a licensed financial advice provider. Our financial advice disclosure statement is available by visiting mas.co.nz or calling 0800 800 627.