Growth Assets provide superior investment returns compared to Income Assets over the long term.

When considering a KiwiSaver scheme, investors should take a long term view.  Over time, Growth Assets such as shares have tended to outperform Income Assets such as bank deposits.

Of course, there have been periods when Growth Assets experience negative returns, but these periods have tended to be short term setbacks when viewed over a long time horizon.

Under KiwiSaver, while lump sum investments may be made, it is envisaged that investors will make regular contributions to an investment portfolio.  This means investments will then build up gradually over time.  This drip-feed aspect of KiwiSaver is significant because:

• KiwiSaver investors should be less concerned about starting levels of market valuation.  This is unlike a lump sum investor who is committing to a single one-off investment and is rightfully sensitive to the market level at the start of their investment horizon.  KiwiSaver contributions will be invested in a range of market environments;

• Assets that fluctuate in value will be acquired at a range of prices.  When prices are depressed, investors will benefit from what is known as Dollar Cost Averaging.  The constant dollar value of contributions will acquire greater amounts of securities.  Hence, a disciplined investor on that basis may regard short term market declines as an investment opportunity.