While you seek a degree of capital appreciation in addition to any interest and dividend income earned, you prefer a predominantly lower risk investment approach. You appreciate that seeking some capital growth may result in a degree of volatility (variation in the value of your overall capital), but wish that to be limited by the more stable returns of the lower risk component of your savings.
A Conservative portfolio may comprise 80% income assets (e.g. cash and fixed interest) and 20% growth assets (e.g. Australasian, global and property equities).
The following sample asset allocation, based on data sourced from Melville Jessup Weaver, an actuarial consultant to the Summer KiwiSaver scheme, can be used as guide in constructing a Conservative portfolio.
|Asset type||Sample allocation %|
|New Zealand and Australian equities||8.0%|
|New Zealand property equities||3.0%|
|Total growth assets||20.0%|
|New Zealand fixed interest||33.0%|
|Global fixed interest||33.0%|
|Total income assets||80.0%|
The Financial Markets Authority has provided guidance on indicators which can help describe investment risk. These indicators are based on annualised standard deviations, a mathematical measure of risk.
On a scale of 1 (least risky) to 7 (most risky), the investment risk of the asset sectors can be described as follows:
|Asset sector||Risk Indicator|
|Cash||1||Very low volatility|
|Fixed interest (New Zealand)||2||Low volatility|
|Fixed interest (Global)||3||Low to medium volatility|
|New Zealand equities and New Zealand property equities||4||Medium to high volatility|
|Other equities (Australian and global)||5||High volatility|