NZ Herald 24 October 2026

AIt’s like motherhood and apple pie. Who could argue against what you say? But it’s not that simple.

Urging someone to save when they find themselves borrowing to feed the family or pay the power bill is just cruel. Hopefully, their circumstances will change, and they’ll be able to save later. But nothing can be gained by adding guilt to their financial struggle.

For those people, the main message has got to be: try really hard not to borrow. And if you must, try really hard to repay the debt as soon as possible.

Then there are the “oversavers”. They’re often single women, but not always. Fearful of the bleak future you describe, they put aside more money than they will need in retirement, and in the meantime miss out on treats and holidays. The main message to them: Enjoy life now, as well as later!

AYou’re right that some people are worried about passive (or index) share funds and ETFs — in and out of KiwiSaver — that invest in the shares in a US market index.

The big US indexes, such as the S&P 500, have become increasingly dominated by AI companies, as their stock prices have soared. Some say those prices are too high and might fall abruptly, bringing index fund returns down with them.

As you say, investing in a worldwide index fund — which is what I recommend — reduces the problem, but global indexes are still tech-heavy.

I asked three fund managers who offer index funds and ETFs whether investors should be concerned.

“Not necessarily,” says Dean Anderson of Kernel. “The top 10 companies are about 39% of the S&P 500 and 22% of a total world index, but they’re global businesses with global revenues. The US saw similar concentration in the 1960s. The difference now is that it’s tech-heavy, so diversification matters.”

Adds Sam Stubbs of Simplicity, “We are less worried. Why? Because these companies in themselves are highly diversified and global, and most investors have a much more diversified set of investments.”

And from Matt Macpherson of Sharesies: “A global fund improves diversification, but still 60% of the world’s listed equity market value is US companies. But this is exactly how index funds are meant to work. The index is simply reflecting the market’s collective view of what those companies are worth. Markets can overvalue companies, but it’s hard to say an individual knows better than the market.”

Some index funds get around the “top heavy” problem by using an index in which no share makes up more than a certain percentage of the fund.

For example, the S&P/NZX 50 Portfolio Index invests, basically, in the biggest 50 New Zealand companies, but no company makes up more than 5% of the index. Smart has an ETF and SuperLife has an index fund based on this index.

But what about global shares?

I put your question to the fund managers — whether they know of any NZ-run broad-based global index funds or ETFs that cap each company’s weight in the index, or in some other way get around the problem.

Nobody came up with exactly that. But Anderson points out that, “The Kernel World ex-US Fund holds nearly 1,000 companies across 23 developed markets (excluding the US), and its top 10 make up only about 12%.”

You can invest in Kernel’s ex-US Fund in KiwiSaver or outside KiwiSaver, and there are hedged or unhedged versions. The fees are a low 0.25%.

To add US shares to the mix, this could be paired with a total world or S&P 500 fund, letting investors “control their own US weighting and reduce concentration,” says Anderson.

Adds Stubbs, “For those wanting 100% US shares, Blackrock has a fund that limits the exposure of any one share to 3%.” This is the iShares S&P 500 3% Capped ETF.

A combination of the Kernel ex-US Fund and the Blackrock fund would go a long way to achieving what you want.

And, as Macpherson points out, “There are obviously a lot more options if you look to ASX or other offshore markets.”

A couple of final comments:

• It’s risky to invest in any share fund unless you’re happy to tie up the money for at least ten years.
• Investors and fund managers who have been avoiding or downplaying the US share market for several years, because of worries over technology dominance, have missed out on some really good returns. If a downturn comes, it will have to be sizable to cancel out those gains.

I’m not saying such a big downturn won’t happen. I don’t know. But if it does, history tells us it will probably come right within ten years, and in most cases much less.

AAnd apparently there is no limit to the meanness of some people.

Let’s review what the reader wrote:

“My sister, now in her 60s, has been disabled from birth and needs 24-hour care. She is in a rest home, funded by her disability and accommodation benefits, but also topped up from a trust left by our parents, in order to get her her own room, and to buy better food and toiletries (pads), because the rest home’s food is woeful and pads are inadequate.

“For many years she has been putting aside whatever she can into KiwiSaver and will have maybe $80,000 by the time she reaches 65.”

Does it sound to you as if this woman lives a life of luxury — with meals out, travel, and fun times with friends?

If she’s been able to gain some security and dignity from growing her KiwiSaver account, she’s very welcome to a portion of my tax dollars to do so.

AAgreed.

AReally good point. The correspondent should get the cheaper term insurance, not whole of life cover.

There’s a good article on Consumer NZ’s website about life insurance. It includes, “The amount you get covered for should be enough to pay off your mortgage, clear any immediate debts, and provide an income for your family.

“One rule of thumb is to be insured for ten times what the highest earner in your family earns annually. This means the mortgage can be paid off and leave your family some money to deal with other expenses.”

If you are a Consumer member — and I recommend joining — you can access a calculator to help you work out how much insurance you need.

AYou’re ignoring one important issue: what we called “the immobility of labour” in economics lectures.

The family in the last column, and most others, probably wouldn’t find it easy to up roots and move from Mangere to Palmerston North or Huntly.

The father has been working for the same employer for 21 years, and in the current employment climate he might well have trouble finding as good a job elsewhere.

And there are four children in school. It’s no small thing to move 10, 12 and 16-year-olds to a new town. Some of my friends still carry scars from having to move towns and friends in their teens. What’s more, there are all the family’s social and whanau networks, which can be really important to wellbeing.

Still, you’re quite right, the family probably could afford to buy a home in some parts of the country — if they want to.

On what’s going to happen to house prices — while building costs are an important factor, so too is the balance between supply and demand.

I’ve been saying for years that the long-term rise of house prices relative to incomes can’t continue. And it has certainly changed recently — dropping from about 11 times household income to about seven times. But that’s still way higher than the two to three times income all the way through from the 1940s to 1990.

I’m not saying prices will get that low again, relative to incomes. But who knows?

By the way, your mortgage calculations are a bit different from the ones I get on the Mortgage Calculator at sorted.org.nz. But they give a rough idea.

AThat’s telling her!