Risk-adjusted returns

Show me the money!

Returns are great! When you contribute to your KiwiSaver account and it gets invested for you, returns are an additional part of your overall balance that you didn’t have to work for.

In the case of investment returns, what you’re being rewarded for is the risk you’ve taken. Generally speaking, the more risk you take, the greater the potential for returns as well as losses.

And based on the graph below of the U.S. share market index, the Dow Jones, going back to the late 1800s, returns have, over time, historically delivered the goods*.

*Historical returns are not an indication of future returns.

Measuring risk

While it’s easy to measure returns, risk isn’t as well defined or quantified. We think a good way to measure risk is by looking at volatility, which is essentially how much something bounces around. For example, the value of a generally lower risk asset class like government bonds, tends to go up and down a lot less than a generally higher risk asset class like cryptocurrency.

If you take a specific time period (like we have in the graph below of 3 years), the measure of the difference between the monthly returns for a fund represents the volatility of that fund. High volatility means more risk.

Risk-adjusted returns

Putting it all together, risk-adjusted returns are a useful way to show the returns you’re getting for the amount of risk being taken.

Below is a graph that plots returns versus risk of the SBS Wealth High Growth Fund and 11 other similar KiwiSaver funds.

Where you want to be is in the top left quadrant of higher returns with a lower amount of risk being taken to achieve those returns.

Grown with care

Everything we do at SBS Wealth connects back to our promise of ‘grown with care’. Whether that’s making sure every member gets access to a Financial Adviser, can get help when they need it through our superb Investment Services team, or by delivering high performing risk-adjusted returns.

And while we’re some of the best in the business at growing your money through higher returns, we pride ourselves on doing this without taking unnecessary risks.

Our not-so-secret sauce for achieving smoother returns is through a combination of diversification across different industries and regions, with a focus on long-term structural investment themes like innovative healthcare and AI.

What you can do

If you already belong to the SBS Wealth KiwiSaver Scheme and want to understand your risk profile, you can either use our handy risk profiling tool or book a time to talk to one of our team of professional Financial Advisers.

If you’re not yet a member and want to join a KiwiSaver Scheme with some of the best risk-adjusted returns in the business, join now! It takes 5 minutes.

Join now!

Disclaimer: The analysis was performed by the SBS Wealth Investment Team and relates to the 3 years to 31 December 2024 time period and is based on an internal peer group that may differ from published peer group reports. Past returns are not an indication of future returns. Return and standard deviation data sourced from Morningstar.