Seven investing hacks to help supercharge your savings

The world of investing can sometimes seem overwhelming, especially if you’re just getting started or don’t have a background in financial markets. These investing hacks are designed to give you the tools and knowledge to help you on your investment journey.

4 minute read

1. Know why you’re investing

Finding your “why” is a powerful way to stay on track with your savings. Knowing what you want to achieve will help you make informed decisions about your investments. Your goals could include overseas travel, starting a business, buying your first home, or longer-term goals like saving for retirement.

Different goals will have different time horizons, which refers to the length of time you plan to hold onto an investment. Your time horizon could be short or long term, and will be an important factor in some of the investment decisions you need to make. This includes things like deciding how much to contribute and choosing the right type of investment for your situation. To learn more about investing for different time horizons, read our articles on short-term and long-term investing.

2. Understand your risk tolerance

All investing comes with a degree of risk. When you’re making decisions around your investments, it’s important to consider how much risk is right for you. You’ll need to consider things like your situation, your attitude to risk, and your investment timeframe.

It’s usually expected that the higher the risk, the higher the potential returns – and the lower the risk, the lower the potential returns. To help you work out the risk approach that’s right for you, you can seek financial advice or use the Sorted ‘Investor profiler’ tool to better understand your risk appetite.

When deciding how much risk you’re prepared to take, bear in mind there’s a general rule that the more time you have to invest, the more risk you can take. To learn more about this, have a read of our article on investment risk. 

3. Diversify your investments

Diversification means holding different types of assets across many sectors, and sometimes in different parts of the world, because they tend to react differently to the many influences that cause market movements. Over the long term, the reduction in risk from diversification can lead to higher investment returns, and a smoother investment experience. As Nobel Prize laureate Harry Markowitz reportedly said, “diversification is the only free lunch” in investing.  

Investing in a diversified managed fund, such as a ‘Conservative’, ‘Balanced’ or ‘Growth’ fund, can be a straightforward way to diversify your investments. Managed funds are financial products that invest your money in shares and other investments like property, term deposits, and cash, and they are monitored and managed by specialist professionals. You can learn more about managed funds here.

4. Make regular contributions

One of the most effective ways to help you achieve your investment goals is to automate your savings and contribute regularly. Depending on your situation, that could involve a weekly, fortnightly, or monthly automatic payment.

By contributing regularly, you’ll take advantage of an investing principle called ‘dollar cost averaging’, which involves investing a fixed amount of money at regular intervals, regardless of market conditions. Dollar cost averaging helps to manage risk by spreading investment across different points of the market cycle. When the market dips, you’re buying assets or investment units at a lower price, which puts you in a good position to take advantage of a market recovery.

If you’re making employee contributions into your KiwiSaver account, you’re probably already doing this. And it’s easy to set up a similar pattern for any of your other investment goals. This eliminates the need to time the market, and can also help you to avoid the temptation to spend your money elsewhere, since it’s automatically transferred out of your everyday account.

5. Stick with the plan

One of the most effective investing hacks is to maintain a level-headed approach, especially during periods of market volatility. It’s natural to feel concerned when the value of your investments fluctuates, however keep in mind that market ups and downs are a normal part of investing.

A simple way of maintaining a level-headed approach is to understand your plan and think about the long-term reasons you’re investing. Implementing a systematic approach can help smooth out the impact of market volatility, which is all part of the investment process. Historically, markets have rebounded and continued to grow over time.

6. Take advantage of incentives and benefits

Maximising savings incentives will help you get the most out of your investments. This includes optimising your KiwiSaver contributions. If you’re employed, aim to contribute at least 3.5% of your before-tax pay, which your employer will match. This effectively doubles your savings without any additional effort. You’ll also want to make sure you contribute enough to maximise your annual Government contribution, which is up to $260.72 of free money for your KiwiSaver account each year (eligibility criteria apply[i]).

It’s also a good idea to make sure your investments are tax efficient. A Portfolio Investment Entity (PIE) is a type of investment entity that may have tax advantages for you, depending on your situation. You can find out more about how portfolio investment entities (PIEs) benefit different investors here.

7. Check in every year or two

While investing is for the long term, it’s important to know that it’s not “set and forget”. Regularly reviewing the goals you’re aiming to achieve and how your investment is tracking towards them is essential.

Stay informed with market developments and plan for regular check ins – at least every year or two – to make sure you’re on track. And each time your situation changes, consider whether you need to adapt your plan. For example, if you get a pay rise, you might want to consider whether you could increase your KiwiSaver contribution rate, or bump up your other savings and investments.

Bonus hack: Make the most of the compounding effect

Compounding refers to the process by which your investment returns are reinvested, allowing you to earn returns on both your initial investment and the accumulated earnings. This can greatly impact the growth of your wealth in the long term as it creates a snowball effect – your returns generate even more returns, leading to significant growth over time. To make the most of the compounding effect, it's best to start investing as early as possible and remain consistent with your contributions.

Summary

Implementing these investment hacks can significantly improve your investment journey and help you achieve your long-term goals. Understand your objectives, consider your time horizon, contribute regularly, and harness the power of compounding to supercharge your savings. By staying disciplined and regularly reviewing your plan, you’ll gain valuable knowledge and experience that can help you make better decisions and achieve greater financial success in the long run. 

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BNZ Investment Services Limited, a wholly owned subsidiary of Harbour Asset Management Limited, is the Issuer and Manager of the BNZ KiwiSaver Scheme. Download a copy of the BNZ KiwiSaver Scheme Product Disclosure Statement PDF 1.1MB, or pick up a copy from a BNZ branch.

Investments in the BNZ KiwiSaver Scheme are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of the BNZ KiwiSaver Scheme or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products and services mentioned on this webpage to customers in New Zealand.

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[i] To be eligible you must be 18 years or older, not yet eligible for retirement withdrawals and mainly living in New Zealand (you may also qualify if you are a Government worker, charity worker or volunteer working outside of New Zealand). More information can be found on the IRD website.

This article is solely for information purposes. It's not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article.