Mary Holm answers readers personal finance queries.
My husband and I have owned our first home for three years. This also coincided with having our first child. We took the money that we could from our KiwiSaver accounts, which greatly contributed to our deposit. Once we had bought, the intention was there to immediately change our conservative fund types over to more risky ones. However, this still hasn't happened.

I have previously read your advice that the best risky fund to choose is one that has the lowest fees. So on your advice about a year ago, I looked on the Sorted website and found the funds with the lowest fees.

They give you a breakdown of the type of investments in the fund. Generally, each of these was either mostly shares or property. I wasn't sure which type to choose, and then life got in the way again. So now I have come back to trying to sort this out, I'm at the same roadblock again - which one to choose?

Can you tell me why I would choose a risky fund with either mostly shares or mostly property investments, and what the differences are?

I want to change my KiwiSaver manager as it is an Australian company, and I want to go with a New Zealand one. That is also why I want to research this a bit rather than just staying with who we have and changing to its more risky funds.

I suspect everyone sometimes gets bogged down in research. While the internet is a wonderful source of information, it can get overwhelming and you end up doing nothing. So let's get your decision made so you can cross this off your to-do list.

But first, you've done well on several counts:

Saving for your first home in a conservative KiwiSaver fund. This is the place for money you expect to spend in a few years, as it won't be much affected by a market downturn right when you want to spend it.

Planning to switch to riskier funds after you had bought the house. It sounds as if you have several decades to go before you retire, and riskier funds - while more volatile - are likely to grow more over the long term.

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Looking for funds with low fees. What you really want, of course, is the fund that will give you the highest long-term returns after fees. But nobody knows which one that will be. And given that fees make a big difference to long-term returns, it's a better bet to choose a low-fee fund.

Using the KiwiSaver Fund Finder on www.sorted.org.nz, which is unbiased and easy to use.As you say, the Fund Finder gives you a breakdown of the main investments in each KiwiSaver fund.

I'm not sure whether you were looking at aggressive funds - with 90 per cent or more of their investments in growth assets such as shares or property - or the somewhat less risky growth funds - with 63-89 per cent in growth assets. Anyway, when I looked at the 10 aggressive funds with the lowest fees, only the SuperLife Property Fund held mainly property. All the rest were mainly shares, as were all of the 10 growth funds with the lowest fees.

This is not surprising, given that fund managers are usually more oriented towards shares, bonds and cash. People tend to make their property investments either directly or through non-KiwiSaver types of vehicles.

But still, the SuperLife Property Fund - owned by a subsidiary of the manager of the New Zealand stock exchange (NZX) - is an option. And, by the way, there are several other KiwiSaver funds that invest mainly in property, but they charge higher fees.

So what does the SuperLife fund hold? In Fund Finder, the provider tells us it "captures the market returns of the listed global property markets.

"It invests, directly and indirectly, on a passive basis, in a diversified portfolio of listed securities on the Australasian and global sharemarkets."

In other words, it invests in property trusts, property funds or similar, listed on stock exchanges around the world. In turn, these trusts and funds invest in a range of commercial properties - office buildings, shops, factories and so on.

Given the type of property, and that fact that the fund includes international investments, it's pretty different from your property investment in your own home - or a rental property if you owned one.

However, I don't think it's your best choice. It might suit New Zealanders who can't get past the idea that property is better than shares, or who have a wide range of other investments and are using this for their exposure to commercial property. But it concentrates on a single industry.

If you invest in a low-fee KiwiSaver share fund - particularly one that includes lots of international shares - you'll have a stake in a wide range of industries. That gives you much broader diversification and therefore less risk.

Check out what Fund Finder says about several of the lowest fee options. As I said above, nobody knows which will turn out best, so don't agonise over your choice. Perhaps put yourself in one fund and your husband in another. Both are likely to perform better over the years than your current conservative funds.

Life stages option

The money invested in KiwiSaver, is it still invested for growth even though at 65 our contributions stop and we are able to withdraw the funds? We are in a conservative scheme because at our age we feel it's not the time for risk.

Generally, your KiwiSaver investment doesn't change because you turn 65 - unless you're in a "life stages option".

If you sign up for one of these, the risk of your investments is automatically reduced as you get older and closer to the time when you'll spend the money. In most cases, the provider simply switches you to funds with less and less risk over time - without your having to do anything.

Nine providers have told the Commission for Financial Capability that they offer this service, through: AMP Lifesteps; ANZ Lifetimes; ANZ Default Lifetimes; Aon Lifepoints Target Date Funds; Fisher Funds TWO GlidePath; Generate Life Stages; NZ Funds LifeCycle; OneAnswer Lifetimes; and SuperLife Age Steps.

In the various providers' options, between 80 and 100 per cent of your money will be invested in growth assets such as shares and property when you are 20. By the time you're 65, this will have fallen to between zero and 50 per cent.

These are a great idea for people who want to "set and forget" their KiwiSaver accounts. But I do have a few reservations:

• Don't use these if you're fairly young and saving for a first home, because you will automatically be in a riskier fund. That's not wise if you expect to withdraw the money within 10 years.

• Nor is it a good idea if you're young and couldn't tolerate big drops in your account balance sometimes.

• Take note of the percentage of investments in growth assets at 65. If you expect to spend your KiwiSaver money soon after that, it's good to have no growth assets at that stage. But if you expect to spend gradually over two or three decades - or perhaps spend none until your 80s or 90s because you have other savings - it would be better if you hold more in growth assets at 65.

However, it sounds as if you two are not using a life stages option, but are simply in a conservative fund.

Your fund will almost certainly hold mainly term deposits (called cash), high-quality bonds and similar investments, with probably a small portion in shares. To find out, use the "Check your current fund" tool in the KiwiSaver Fund Finder on www.sorted.org.nz

With those investments, your balance will probably grow a little most years, but with some usually fairly mild ups and downs. It's possible, though, for both bonds and shares to lose value some years. If that worries you, switch to a defensive fund, which invests mainly in cash.

No tax - what a gift

Mum and Dad want to help us to reduce our mortgage, so they are willing to gift a lump sum of their savings to me.

My assumption is IRD may have to take a portion of it as my income tax. However, if I don't take the gift, there is hardly any saving for my family's future as most of our money is spent on mortgage repayments and groceries.

Can you please tell me whether it is worth accepting my parents' kind proposal at a cost, or should I just keep on my own budget to repay the loan all by ourselves?

Accept your parents' gift - and remember them in their old age when they need help from you, financial or otherwise!

There are no tax issues arising from a gift like this. Since October 2011, there has been no gift duty payable by those who give a gift. And it's not taxable income for you.

Mortgage trap

We are recently married and have bought our first property in Auckland, with a mortgage of $650,000. Current mortgage interest is quoted at 4.10 per cent on average for the next three years.

I have a share portfolio in the UK of about $230,000. Our long-term plans for this would be for future family/retirement. The current return is about 3 per cent a year. Bearing in mind if we do transfer these funds over, currently it would be at a poor exchange rate.

Using the "don't put your eggs in one basket" approach, which I'm a fan of, we would not like to pump all of this into the expensive Auckland house. However, our mortgage figure scares me!

I agree that's a scary mortgage, especially as mortgage interest rates seem likely to rise. And life's too short to be scared about your finances.

Given that the return you've been earning on your shares is less than the interest you're paying on the mortgage, you're actually going backwards - compared to where you could be if you sold the shares and paid down the mortgage.

But even if the share return were higher, I would still suggest you concentrate on getting that mortgage down - while contributing enough to KiwiSaver share funds to get the full employer and Government contributions and give you a bit of diversification. Once you've paid the mortgage off, you'll be in a strong position to get back into shares.

On the exchange rate, there's no way of knowing which way it will go. Today's rate might even look good next year. You could spread the risk a little by selling the shares and moving the money to New Zealand in, say, three lots, separated by several months. But don't muck around too long.