Sharesies Review: Why Customising Your KiwiSaver is a Statistical Gamble.
KiwiSaver is likely to be one of the largest long-term investments most New Zealanders will ever hold outside of the family home. For years, the system was "set and forget," with investors choosing a risk profile (Conservative, Balanced, or Growth) and letting a fund manager do the rest.
However, the rise of digital platforms like Sharesies has introduced a new era of "self-select" KiwiSaver. While the ability to pick your own individual stocks or niche ETFs is exciting, it brings a new set of risks that every Kiwi needs to understand before hitting the "buy" button on their retirement savings.
The Mathematical Challenge: Is picking stock winners really that hard?
Before diving into platform features, it is vital to understand the "math" of the stock market. Most investors believe that most stocks go up over time and a few "duds" go down. Academic research suggests the opposite is true.
Professor Hendrik Bessembinder (Arizona State University) conducted a study titled "Do Stocks Outperform Treasury Bills?". He found that between 1926 and 2016, only about 4% of U.S. listed companies created all the net wealth in the stock market above what you would have earned from basic government bonds. The other 96% of stocks, in aggregate, only matched or underperformed Treasury bills.
A later global study by Bessembinder and colleagues, "Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks," found that just 2.4% of global companies generated all net wealth creation between 1990 and 2020.
The statistical reality: If you self-select a handful of stocks for your KiwiSaver, you are statistically far more likely to miss those "top 2-4%" of companies that drive nearly all market returns. By narrowing your focus, you increase the probability of underperforming a simple, broad index fund that guarantees you own those few "superstar" stocks.
Even the "Oracle of Omaha" Agrees
If the academic data seems abstract, we only need to look at the track record of the world’s most famous investor, Warren Buffett.
In Berkshire Hathaway’s 2022 annual letter to shareholders, Buffett provided a remarkably candid assessment of his nearly six decades of investing. He wrote:
“Most of my capital‑allocation decisions have been no better than so‑so… Our satisfactory results have been the product of about a dozen truly good decisions — that would be about one every five years.”
Think about that: arguably the greatest investor in history attributes his legendary success to just twelve exceptional decisions over 58 years. The rest were "so-so."
This reinforces the danger for the average KiwiSaver member: if you use your "self-select" portion to pick five or ten stocks today, you are betting that your hit rate will be significantly higher than Warren Buffett’s. Statistically, the odds are not in your favour.
Link to Berkshire Hathaway 2022 Annual Letter to Shareholders (The specific quote can be found on page 6 under the "Mistakes – Yes, We Make Them at Berkshire" section.)
How does Sharesies KiwiSaver work?
Sharesies has disrupted the traditional model by offering a "Core and Satellite" approach. Investors can:
Select "Base Funds": Diversified base funds managed by established names like Milford, Smartshares, or Kernel. Investors must allocate at least 50% of their KiwSaver towards the base fund.
Add Individual Stakes: Allocate a portion of their KiwiSaver (currently capped at specific percentages to ensure some diversification) into individual NZ, US, or Australian shares and ETFs.
How do the Sharesies KiwiSaver fees work?
A common point of confusion is the fee structure. For example, if you access the Milford Aggressive Fund via Sharesies, you might see an underlying fund charge (around 0.47%). However, this is just the "layer" fee.
While most KiwiSaver members are accustomed to a single annual management fee, the Sharesies model introduces a "layered" fee structure. Depending on how you use the platform, these costs can accumulate significantly:
Management Fees: You will pay a base fund fee (which varies depending on the manager you choose, such as Milford or Pathfinder).
Administration Fee: On top of the fund fees, an additional 0.15% p.a. admin fee applies to the balance of your "individual picks." This is baked into the unit price of those specific holdings.
Transaction Fees: Unlike traditional providers, every time you buy or sell within your self-selected portion, you incur a transaction fee. This is currently 1% for amounts up to $1,000, and 0.1% for any amount above that. For smaller, frequent contributions, a 1% "entry and exit tax" can create a substantial drag on performance.
Currency Conversion: If you opt for the Sharesies US500 Fund or individual US/Australian stocks, a 0.50% currency exchange fee applies to every buy and sell order.
When you add the total management and administration fees, the cost may be closer to or more than the direct Milford fee (approx. 1.15% per Milfords website). You must also factor in transaction fees and potential subscription costs. Always review the Product Disclosure Statement (PDS) for the "all-in" cost.
The "Forced Rebalancing" Rule
It is also vital to understand that "self-selection" does not mean "unlimited freedom." To ensure the scheme remains within specific risk guidelines, Sharesies enforces strict allocation limits.
If one of your individual picks performs exceptionally well, it may "outgrow" its allowed slot. If a single pick exceeds 10% of your total portfolio for more than 90 days, or hits 15% at any time, you will be forced to realign your investments. This means you may be required to sell down your "winners" to bring them back below the 10% threshold, potentially triggering transaction fees and forcing you out of a position you intended to hold long-term.
How does Sharesies compare to traditional KiwiSaver providers?
In the active management space, Milford KiwiSaver and Generate KiwiSaver offer professionally managed, diversified portfolios with minimal customisation, meaning you choose from preset funds but you are able to change the percentages held in each diversified fund. Milford’s fees typically range from 0.60% to 1.57% (potentially including performance fees), while Generate’s fees generally sit between 1.15% and 1.48% plus a $2 monthly fee. Both are designed for investors who prefer to leave asset allocation and stock selection to professional teams. Both have had market leading returns net of fees (so the returns to you once fees have been taken out).
Alternatively, Kernel KiwiSaver provides a "middle ground" with a passive, index-based investment style. While it doesn't allow for individual stock picking like Sharesies, it offers medium customisation by letting you build a portfolio from over 20 different funds. Kernel is often noted for its lower fee structure, ranging from 0.25% to 0.45% plus a $2 monthly membership fee, and carries a lower behavioural risk due to its systematic, rules-based approach.
What are the Pros and Cons of a "DIY" KiwiSaver like Sharesies?
The Pros
Flexibility: You can align your retirement savings with your values (e.g., investing specifically in clean energy ETFs). However there are KiwiSaver providers who do a better job of this anyway ie Pathfinder as a good example for those that want ethical investments).
Engagement: People who pick their own stocks often check their accounts more, which can lead to a better understanding of financial markets. This may mean that through engagement you are more likely to increase your contributions which is always a good thing. However the temptation to trade rather than buy and hold will mean that statistically speaking you are likely to have lower returns.
Consolidation: You can manage your "fun money" and your "retirement money" in one app.
The Cons
Concentration Risk: If you use the portion allowable to pick individual stocks, you are likely to miss the "4% of winners" mentioned in Bessembinder’s research and far more likely to underperform. Canstar has completed a review of Sharesies KiwiSaver which you can read here in which they state ‘greater control comes with greater risk’.
Behavioural Bias and the "Overconfidence" Effect: While using the self-select allocation (up to 50%) for broad ETFs is generally lower risk than picking individual stocks, it does not insulate an investor from behavioural pitfalls. Data consistently shows that many investors (and this is statistically more prevalent among males) tend to suffer from overconfidence bias, believing they can outperform the market average. This leads to taking "punts" without a full grasp of the risks involved, particularly the staggering opportunity cost that lost returns represent when compounded over several decades.
Performance Chasing: There is a tendency to buy what performed well last year, which often leads to "buying high and selling low" and there is an increased risk of becoming a trader rather than using a buy and hold approach. This means you’re far more likely to underperform and transaction fees are higher.
Fees, expertise and time: Managing a self-selected portfolio requires significantly more time and financial literacy than choosing a well diversified fund. It will be harder for the average person to compare apples with apples on a performance and fees basis with other funds as part of the fees and performance are going to be your individual picks so unless you know what to look for and where this provides some transparency issues.
Practical Guidance: The "Core and Satellite" Strategy
If you are drawn to the customisation Sharesies offers, a disciplined approach is essential. Consider keeping a "90/10" split: keeping at least 90% of your balance in a highly diversified, professionally managed "Base Fund" and a smaller 10% allocation to your picks. And then by using the self-select portion only for broad ETFs (like a Total World Fund), you ensure you capture the "winning 4%" of global companies identified in Bessembinder’s research.
The Case for Separation: Why Keep "Fun Money" Out of KiwiSaver?
While the ability to customise your KiwiSaver is a modern convenience, it raises a significant strategic question: If you are only going to pick a small percentage of stocks, why not keep your "play" money entirely separate from your retirement fund?
There are three compelling reasons to keep your DIY trading in a standard investment account rather than inside KiwiSaver:
Avoiding Forced Liquidations: As mentioned earlier, Sharesies KiwiSaver has strict rebalancing rules. If you "pick a winner" and that stock skyrockets, you may be forced to sell it to stay under the 10% threshold. In a separate personal trading account, you can let your winners run indefinitely.
Psychological Guardrails: There is immense value in maintaining a clear distinction between "Retirement Savings" (which require stability and long-term compounding) and "Individual Picks" (which carry higher risk). Mixing them can cloud your judgment and tempt you to take "punts" with money you’ll need at age 65.
Simplicity and Fee Clarity: Leaving your KiwiSaver with a dedicated manager (like Milford, Kernel, or Generate) and using a separate platform for individual trades often results in a cleaner fee structure and easier performance tracking (where you can compare fees and quarterly performance against other KiwiSaver providers giving you a relative benchmark).
Final Thoughts
Sharesies has successfully democratised investing for New Zealanders, but self managing stock picks for retirement savings isn't for everyone. For many, the most effective path to wealth is the simplest: a high-quality, low-leakage, diversified KiwiSaver fund that grows quietly in the background, while "active" trading is kept as a separate, intentional hobby elsewhere.
Compliance & Important Disclosures
Not Financial Advice: This article is for informational and educational purposes only and does not constitute personalised financial advice.
Risk of Loss: KiwiSaver is an investment; returns are not guaranteed, and the value of your investment can go down as well as up.
Check the PDS: Before switching KiwiSaver providers or changing your investment strategy, you should always read the relevant Product Disclosure Statement (PDS) provided by the issuer.
Past Performance: Past performance is not a reliable indicator of future results.
Consult a Professional: If you are unsure about your investment strategy, it is recommended that you speak with a Qualified Financial Adviser. We are always happy to help talk through your options. Reach out via our contact us page.