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New Zealanders underestimate investment risk and prefer lower risk investment options

Page last updated: 14 Oct 2014

Media release
MR No. 2014 – 034
14 October 2014

Research conducted for the Financial Markets Authority (FMA) shows Kiwis are switched-on about straightforward, low-risk investment options. But when responding to questions about investments with more risk, people are far less confident.

The FMA ran the survey as part of its contribution to this year’s Money Week, running from 13 – 17 October. Money Week encourages New Zealanders to think about their personal financial situation.

The survey asked respondents to assign a risk-level to various investments, including shares, KiwiSaver funds, term deposits, bonds and residential property investment. People were also asked whether these investments came with a guarantee you would get all your money back.

81 per cent of respondents said term deposits were low risk and 73 per cent said KiwiSaver conservative funds were low risk.

But when it came to higher-risk investments such as shares and growth funds the results gave a mixed picture. 34 per cent said KiwiSaver growth funds were high risk, while 21 per cent identified growth funds as low risk. 44 per cent thought shares were medium or low risk. Most experts would accept that shares are a higher-risk investment choice, albeit with higher potential returns over the long term.

Simone Robbers, FMA Head of Primary Markets and Investor Resources, said “People seem to understand that term deposits and fixed interest investments are lower risk investments but there was confusion around the levels of risk of growth focused investments.

“We want to help people become comfortable about discussing all kinds of investment products so they can make more informed decisions. It’s important to understand what level of risk is most suitable for you and the mix of investments that will help you reach your financial goals.”

There is also confusion about whether investments are guaranteed or not. 52 per cent of respondents said that term deposits came with a guarantee, and 42 per cent said KiwiSaver was guaranteed.   People holding these investments were more likely to think that they came with some form of guarantee.

The government does not guarantee these investments and nor do providers. Only 17 per cent of those surveyed thought that none of the investments included in the research came with a guarantee.

“Every investment comes with some level of risk and we need to ensure people are reading the descriptions in the product disclosure documents as these should clearly spell out the risks and the returns associated with a product. This product disclosure should describe whether an investment is guaranteed or not,” said Ms Robbers.

There are resources available on the FMA website where you can find out more about investing. The Sorted.org website has resources and tools available to find out about your own investment risk profile. The Sorted Fundfinder tool helps KiwiSaver members compare investment funds and find out more about how their funds are invested.

Other key findings from the survey include:

  • 43 per cent thought residential property investment was a low risk option, while 48 per cent considered this medium risk.
  • There were few noticeable differences between age groups in their understanding or approach to risk. However when it came to residential property investment, 13% of 18-24 year olds thought property was high risk  compared to 3% of 50-64 year olds.
  • Almost two-thirds (62%) prefer steady investments offering a reliable return, compared to 39 per cent wanting the best return, even if the value of the investment went up and down.
  • Men were more likely than women to want the best return for their investment (43% v 35%). Women were more likely to want to maintain all the money originally invested (53% v 45%).
  • Aucklanders are more likely than the rest of the country to prefer the best return overall (46% for Auckland v 39% for all respondents). They are also more likely than average to want an investment which will double their money in 10 years (15% v 10%).
  • Half (49%) of those surveyed would take a day or less to choose where to invest $10,000, and nearly one-in-five (17%) would take an hour or less.
  • A third (34%) of those surveyed said they intend to seek financial advice in the next year.

Full results of the survey here.

Colmar Brunton conducted the survey and interviewed 1,028 people between 27 August and 2 September 2014. The margin of error is +/- 3.1%.

Find out more about Money Week here.

Come to FMA’s Heavy Weight Debate for Money Week in Auckland here.



Andrew Park
09 967 1215
021 220 6770