Step 2:
Understand your constraints
Goals tell you where to go, but your investing constraints determine how you’ll get there. Your risk tolerance, investment timeframe and personal values determine which investments are right for you, not just what’s trending.
Step 2: Understand your constraints
Time, risk and personal preferences
Key investing constraints
What it is: How long until you need the money?
Long-term (7+ years): Growth-focused (e.g. retirement)
Long-term growth goal? Time is your ally. You can afford to ride out the short-term market turbulence that comes with higher-risk investments.
Medium-term (3–7 years): Balance growth and stability (e.g. an education fund)
Medium-term stability goal? The focus is on steady progress towards a near-future milestone, meaning lower capacity to tolerate market swings.
Short-term (0–3 years): Safety first (e.g. emergency fund, house deposit)
Short-term safety goal? The priority is to preserve your capital at all costs, with very low capacity to take on market volatility.
Question to ask yourself: Could I wait 5+ years if my investments lost value?
What it is: Your overall ability, emotionally and financially, to take on the risks of investing.
Risk appetite: How much volatility can you stomach without panicking?
Risk capacity: How much can you afford to lose? The longer your investment horizon or the bigger your financial safety net, the larger your risk capacity.
Aggressive: Unfazed by big swings, with a long investing horizon
Long-term growth goal? Typically associated with a high risk tolerance. Aggressive investors tend to be growth-heavy (e.g. shares, crypto), and higher-risk investments may mean potentially higher rewards.
Moderate: Okay with some ups and downs, with a medium investing horizon
Medium-term stability goal? Typically associated with a moderate risk tolerance, mixing growth and income investments for steadier returns (e.g. bonds, dividend funds or diversified funds).
Conservative: Lose sleep over small dips, with a short investing horizon
Short-term safety goal? Typically associated with a conservative risk tolerance. Lower-risk investments aim for modest returns while protecting your capital (e.g. term deposits, cash funds).
Question to ask yourself: How would I react if my investment fell by 30% in value?
What it is: Investing is a personal decision, not just a financial one.
Like any life decision, investing can be shaped by personal preferences, including how you’d like investing to be done from an ethical or strategy perspective.
ESG investing
Prioritise investments that consider environmental, social and governance factors (e.g. excluding fossil fuel companies from the investable universe).
Impact investing
Prefer investments that aim to generate a measurable, beneficial social or environmental impact alongside financial returns.
Active vs passive
Do you prefer managers that aim to cost-effectively track the market (index funds), or more cost-intensive ones that hand-pick investments to try to outperform it?
Question to ask yourself: Would I sacrifice some returns to invest ethically?
Take a questionnaire to determine your risk tolerance today.
InvestNow Investor Risk Profiler
Answer a few questions to see how different levels of investment risk relate to different types of funds.
Sorted Investor Risk Profiler
The independent investor profiler from Sorted.org.nz.
Ready for the next step?
Now that you know your goals and constraints, let’s design a portfolio tailored to you.
Join the InvestNow KiwiSaver Scheme today
Submit an application, manage your investments and view portfolio performance easily from your online account.