In theory, there’s no difference between theory and practice. In practice, there is.

In theory, I like the idea of funds that adjust your investment approach (asset allocation) based on your age.

The idea is that at the start of your life, you can/should invest more aggressively, and as you get older, you should invest more conservatively. These funds effectively automate the process of adjusting your asset allocation to better suit your age. They are the ultimate “set and forget” investment.

In theory, this is great. As a general rule, people should invest more aggressively when they’re younger and more conservatively when they’re older.

The trouble is, age is not the only factor that determines whether an investment strategy is suitable. I know people who are in their thirties who should be invested entirely in defensive assets such as cash and bonds. This is because they’re about to buy a home and don’t want to be exposed to any volatility in relation to their house deposit.

And I know people who are in their sixties who are invested almost entirely in growth assets – and in light of their circumstances, needs, and objectives, this is suitable for them. This is because they have more than enough money, and their concern is not sustaining their lifestyle but maximising their wealth for future generations and/or causes they care about.

The other problem is that a fund like this can’t consider your broader circumstances. A fund like this is, at its heart, myopic. It can’t factor in your other investment assets, such as funds inside KiwiSaver or the equity you hold in one or more properties or businesses. And as I’ve alluded to above, it can’t factor in your future cash flow needs.

The best argument I have for using a tracker fund like this is that they are great for people who are extremely disengaged with their finances.

But even then, my advice for someone like this would be to ENGAGE IN YOUR FINANCES!!!

I would also stress that working out a suitable asset allocation for you isn’t really that hard and is well worth your time. (I explain how to calculate your asset allocation here.)

I don’t begrudge age tracker funds. I like living in a world where they’re available. In fact, I have a soft spot for them, because it feels like they’re a rare financial product created with good intentions.

But I’ve never used them or recommended them. And as hard as I try, I struggle to think of a situation where I’d use them, or recommend them to a close friend, family member, or client.

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (, he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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