Have you ever noticed your KiwiSaver or managed fund balance moving up and down and wondered why? That movement often comes down to a change in something called the unit price — and it’s one of the key things that determines the value of your investment.
So, what is it?
In simple terms, every time you deposit or withdraw money from your fund, you buy or sell units in that fund. Each unit has a unit price, which is the value of one unit in your investment fund on any given day. The price of each unit changes daily depending on the current value and performance of the fund’s underlying investments. Still confused? Let me explain it in the simplest (and tastiest) way I know: ice cream.
Imagine your investment as a tub of ice cream
When you contribute to your investment, your money buys units in that fund – think of them like scoops of ice cream. One unit is one scoop, and the unit price is the cost of that scoop on the day you invest.
For example:
If one scoop (unit) costs $2 and you invest $10, you get 5 scoops.
If the unit price of a scoop goes up to $2.50 and you invest another $10, you’ll only get 4 scoops.
So, the unit price determines how many scoops you get for your money on any given day. It also affects the total value of your tub:
5 scoops that cost $2 mean your tub is worth $10
5 scoops that cost $2.50 mean your tub is worth $12.50
Why does the unit price change?
Just like ice cream prices can change based on demand or ingredients, unit prices change because the value of the investments held by your fund changes.
Your fund is made up of things like shares, bonds, and other assets. When these investments go up in value, the unit price rises. When they drop in value, the unit price falls. It’s completely normal.
While the value of your investment may have dropped due to a fall in the unit price, as the unit price rises again, the value of your investment (or tub) recovers and over time should continue to grow.
The ups and downs, and what matters most
Unit prices moving up and down can feel unsettling at times but it’s not necessarily a bad thing – it can work in your favour either way. When the unit price drops, if you’re making regular contributions, you’re buying more scoops. When the unit price rises, the value of each scoop increases – meaning your tub is worth more.
Rather than stressing over daily ups and downs, focus on how your investment is tracking over time. Markets fluctuate, that’s just part of the journey but with consistency and patience, your investment has time to grow.
Final Scoop
So next time you see the unit price go up or down, don’t panic. That’s just the market doing its thing.
What matters most is that you stick to the investment strategy that is best for you and keep adding to your tub – scoop by scoop – for your future.
Talk to us
If you have any questions about whether you have the right investment strategy for your goals, you can get in touch with our friendly team – we’re here to help.
