Currently, I am switching to InvestNow for Kiwisaver, as they are the cheapest in fees for long runs (over 20 - 30 years). However, I am just thinking about the costs involved for rebalancing my portfolio when closing to my retirement age.
So let's assume, when I am 55 years, my total Kiwisaver balance is 1M over 2 funds (S&P500 and Total Worlds) with 500k each. If I want to switch 10% of the total balance (e.g. withdrawing 5% from each fund and put) to a conservative fund (and making the weight over the 3 funds as 45%/45%/10% between SP500/Total World/conservative fund), I am not sure how the cost would involved here. I can think there are 2 kind of methods
1 - taking 50k from each of existing funds, and due to 0.5% of selling fees, the cost would be rough of 50k * 0.5% * 2 = 500 (and assuming there is no buy fees for the conservative fund). Note - the weight across 3 funds may not be exact as 45%/45%/10%
2 - converting all funds into cash (temporally) and re-purchase the funds with the exact weight. This would be the worst, as this would cost roughly 1000k * 0.5% (for selling fee) + ~ 900k * 0.5 (for purchasing 45% and 45% of SP500 and Total World) = ~9500 in fees.
I cant find anything about this from MoneyHub, and from InvestNow FAQ
, it seems to use the first method, but not very clear.
I hope the 2nd method is never been used, as a couple of portfolio rebalancing will eat all the saving from low fees over decades. I thinks this is not a problem for their non-kiwisaver funds, as a user can always manually sell certain unit of funds into cash accounts, and then buy the target funds.
The current investment form of InvestNow Kiwisaver for me is `set and forget`, and if I need more controls (e.g. gradually switching to less aggressive funds) when closing to retirement and the cost for the rebalancing is too high, I may just switch to another low fee provider at that time (but InvestNow is still the cheapest in fee until then).
As such, a suggestion to InvestNow Kiwisaver on their ‘Change your portfolio’ page UI - it would be great if they can give a user a rough estimations of cost when rebalance between funds. This is due to the buying and selling fees / spreads from InvestNow, and probably not a problem for most other Kiwisaver providers as their single management fee should cover this already.
So let's assume, when I am 55 years, my total Kiwisaver balance is 1M over 2 funds (S&P500 and Total Worlds) with 500k each. If I want to switch 10% of the total balance (e.g. withdrawing 5% from each fund and put) to a conservative fund (and making the weight over the 3 funds as 45%/45%/10% between SP500/Total World/conservative fund), I am not sure how the cost would involved here. I can think there are 2 kind of methods
1 - taking 50k from each of existing funds, and due to 0.5% of selling fees, the cost would be rough of 50k * 0.5% * 2 = 500 (and assuming there is no buy fees for the conservative fund). Note - the weight across 3 funds may not be exact as 45%/45%/10%
2 - converting all funds into cash (temporally) and re-purchase the funds with the exact weight. This would be the worst, as this would cost roughly 1000k * 0.5% (for selling fee) + ~ 900k * 0.5 (for purchasing 45% and 45% of SP500 and Total World) = ~9500 in fees.
I cant find anything about this from MoneyHub, and from InvestNow FAQ
, it seems to use the first method, but not very clear.
I hope the 2nd method is never been used, as a couple of portfolio rebalancing will eat all the saving from low fees over decades. I thinks this is not a problem for their non-kiwisaver funds, as a user can always manually sell certain unit of funds into cash accounts, and then buy the target funds.
The current investment form of InvestNow Kiwisaver for me is `set and forget`, and if I need more controls (e.g. gradually switching to less aggressive funds) when closing to retirement and the cost for the rebalancing is too high, I may just switch to another low fee provider at that time (but InvestNow is still the cheapest in fee until then).
As such, a suggestion to InvestNow Kiwisaver on their ‘Change your portfolio’ page UI - it would be great if they can give a user a rough estimations of cost when rebalance between funds. This is due to the buying and selling fees / spreads from InvestNow, and probably not a problem for most other Kiwisaver providers as their single management fee should cover this already.