What does risk appetite mean?
An investor’s risk appetite is his or her willingness to take on risk – but it’s really important to understand exactly what risk means in the context of your KiwiSaver. In a diversified and well-balanced long-term KiwiSaver fund, risk refers to your willingness to withstand volatility (the ups and downs of markets), rather than your willingness to lose all of your investments.
So - if you need your money soon, then risk really means risk because you may be forced in cashing out at the wrong time. But if you are investing for the longer term, your risk appetite reflects how comfortable or not you are with market swings.
We discuss this in considerably more detail in our blog here.