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Choosing Wisely: Understanding Investment Risk

The idea of moving your money from a savings account to an investment product or service is gathering traction in New Zealand, primarily because of the inflationary environment we are living in, with prices going up at a faster rate than the interest received on savings accounts. What this means is that more and more Kiwis are seeking alternative non-bank investment options to help counter the inflationary pressures they’re experiencing on an everyday basis.

In response to these changing times, there are regular articles in the newspaper, magazines and online about investing and there are many more accessible investment options available, all eager to capture the hearts and minds of potential investors.

In such an environment, it can be hard to know how to compare one offer to the next, or know which offer is the right one for you.  While no one wants to see their hard-earned savings going backwards in real terms, they also don’t want to rush into an investment decision or make the wrong call and put their capital at risk in the process.

Investing is personal and factors such as financial position, investment time, and financial goals all determine an investor’s appetite for risk.

A useful tool is the ‘Managed Fund Risk Indicator’ which is designed to help potential investors understand and compare investment products with a focus on the potential for loss and growth that may affect their investment. Managed funds in New Zealand must have a risk indicator and disclose this in their offer documents i.e. their Product Disclosure Statements.

“The purpose of a risk indicator is to provide investors with a simple tool that shows the historical volatility of returns of the fund. The risk indicator is intended to help investors make decisions, enabling them to compare the volatility between various managed investment scheme (MIS) products.”

Financial Markets Authority (FMA)

For comparative purposes, the indicator features a simple table that rates managed funds from 1 (low) to 7 (high), with the rating reflecting the historical volatility of each fund’s assets.  A higher rate means higher potential returns over time, but it does mean more ups and downs along the way. By comparison, a lower rate like a 1 or 2 means less volatility but lower potential returns.

At FMT, we are structured to be a conservative investment offer, so it’s not surprising that our funds currently have a risk indicator of 1. 

It’s important to note that this does not mean that we are a risk-free investment, and it is not a guarantee of our funds’ future performance.  This risk indicator is based on the returns data for the five year period ending 30 June 2023. While risk indicators are usually relatively stable, they do shift from time to time. There is also the chance that a major market event could impact the fund, and these events don’t tend to be reflected in risk indicators.


“We optimise investor return rather than maximise it – that means making sure we find the right balance between risk and return. These are the key ingredients to our success and in our 27 years we can proudly say that we have never lost a cent of investor capital.”

Paul Bendall, CEO

To find out more about our conservative approach to investing, and to learn more about how we define and manage our response to risk, you can read our Product Disclosure Statements. These outline further information on our risk mitigation strategies around all aspects of our business.

Should you require any further information about investing with us – give our friendly team a call on 0800 321 113. We also run Investor Meetings – where you can meet the team, click here to see if there’s an event near you.

First Mortgage Managers Limited is the issuer of the First Mortgage Trust Group Investment Fund and the First Mortgage PIE Trust and is not a registered bank. Past performance is not a reliable indicator of future performance. Returns are not guaranteed.

Why invest with us?

We know risk is a major consideration when deciding where to invest. With FMT our investments are backed by first mortgages over land and buildings. Property-based securities traditionally provide some of the least volatile investments. In addition, the funds always hold cash investments (liquidity) with New Zealand banks to help ensure cash is available to repay investors when needed.

Learn more about investing with FMT

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              Which type of fund is right for me?

              Complete this questionnaire to see what type of fund might be the most tax effective for your circumstances. Please note, this is just a guide and we recommend you seek professional tax advice.

              Are you investing as an individual or trust?
              Other investor types should seek professional tax advice.


              Is your tax return completed by a tax adviser or accountant?

              Can you reasonably estimate your own annual income?

              What is your total income from all sources (including PIE income)?

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              Do you distribute all annual income to beneficiaries?

              Do all Trusts beneficiaries earn more than $48K from all sources (including PIE income)?

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              Disclaimer – This tool is intended to provide general guidance only. This tool does not take into account your particular financial situation, objectives or goals.

              There are alternative strategies which may provide better outcomes, we recommend you seek independent advice before making any investment decision. If you have completed this guide and wish to discuss this, we recommend you seek professional tax advice.