If you have a KiwiSaver scheme, then the biggest return you will have seen so far will have come from the employer and government contributions, not the returns on the investment itself. The average person has around $5,000 collected in their account. It will take some time for even a good investment year to make an impact on savings of this size.

The temptation for many investors therefore will be to switch from one KiwiSaver provider to another, looking for better rates of return. In 2010, 123,308 transfers were reported, with some investors changing their minds four times in the same period!

This is not terribly clever thinking for two reasons; first because KiwiSaver is an expensive scheme for providers to manage, having thousands of customers with very small pots of money and the need to communicate with them all. So switching KiwiSaver providers means more paperwork, and will eventually drive up costs.

Second, the temptation to chase short-term profits is not good with any type of investing. Historical data has proved that people who change their minds frequently and buy and sell investments tend to lose money rather than make it. A Morningstar survey in October 2010 showed that conservative default schemes had been the winners over the previous three years, with an average annual return of 4.56 percent.

Those funds which invested primarily in bonds and cash had performed best, as global equities and the domestic sharemarket had given negative returns over the past three years.

As the recession lessens, you would expect returns from equities to improve. But the lesson learned is a good one; KiwiSaver should be your most risk adverse investment. Treat it like the nest egg it is supposed to be and don’t gamble it on winners and losers.