The two-fund portfolio is a widely respected investment approach: own just two diversified funds — one for NZ and one for the world — and nothing else. It’s slightly more complex than a one-fund portfolio but gives you control over your NZ/international allocation.
A simple two-fund portfolio for NZ investors: 80% global index fund + 20% NZ index fund. Best implementation: InvestNow Foundation Series International (0.20%) + Foundation Series NZ Shares (0.20%), or Kernel Global 100 (0.25%) + Kernel NZ 20 (0.25%). Set up auto-invest and rebalance once a year. Total time: 30 minutes to set up, 1 hour per year to maintain.
Why Two Funds Instead of One?
The one-fund portfolio (e.g., Simplicity Growth Fund) is the simplest approach — one decision, no rebalancing. But some investors prefer two funds because:
- Control over NZ/global split: A one-fund portfolio bundles NZ and global exposure in fixed proportions. Two funds let you choose your own allocation.
- Lower fee with InvestNow: Two InvestNow Foundation Series funds at 0.20% each can be cheaper than some one-fund options.
- Transparency: You can see exactly how much of your portfolio is NZ vs global.
- Flexibility: Adjust the NZ/global split as you age or as your views evolve.
The Core Two-Fund Allocation
| Fund | Allocation | What it gives you |
|---|---|---|
| Global index fund | 70–90% | Exposure to ~1,500–3,000 global companies (US, Europe, Japan, etc.) |
| NZ index fund | 10–30% | Exposure to NZX 50 — NZ companies, imputation credits, NZD |
Common allocations:
- 90/10: Minimal NZ home bias — most aggressive global tilt. Good for investors who believe global diversification > NZ-specific benefits.
- 80/20: The most common NZ investor split. Enough NZ for imputation credits; enough global for diversification.
- 70/30: Moderate home bias. Still well-diversified globally.
Best Two-Fund Combinations in NZ
Option 1: InvestNow Foundation Series (0.20% each)
| Fund | Fee | What it tracks |
|---|---|---|
| Foundation Series International Shares | 0.20% | MSCI World (global developed markets) |
| Foundation Series NZ Shares | 0.20% | NZX 50 (NZ large caps) |
Total fee: 0.20% blended (same fee for both) Minimum: $250 per fund Platform fee: $0
InvestNow is the cheapest two-fund implementation in NZ. Both funds are PIE, taxed at PIR max 28%.
Option 2: Kernel (0.25% each)
| Fund | Fee | What it tracks |
|---|---|---|
| Kernel Global 100 | 0.25% | Top 100 global companies |
| Kernel NZ 20 | 0.25% | Top 20 NZX companies |
Total fee: 0.25% blended Minimum: $1 per fund Platform fee: $0
Kernel’s advantage: excellent app, $1 minimum, auto-invest. Slight fee disadvantage vs InvestNow.
Option 3: Smartshares ETFs via NZX (0.20% + 0.20%)
| ETF | Fee | What it tracks |
|---|---|---|
| Smartshares TWF (Total World Fund) | 0.20% | MSCI ACWI (global developed + emerging) |
| Smartshares NZG (NZ Top 50 ETF) | 0.20% | NZX 50 |
Total fee: 0.20% blended Minimum: ~1 unit (approx $100–$150) Platform fee: Depends on broker (free via direct Smartshares, 0.50% via Sharesies)
Best if you want NZX-listed ETFs and intraday trading. Less convenient than InvestNow or Kernel for auto-invest.
How to Set It Up (InvestNow Example)
- Open an InvestNow account at investnow.co.nz (15 minutes, NZ ID required)
- Set your PIR rate (10.5%, 17.5%, or 28%)
- Set up two funds:
- Foundation Series International Shares — allocate 80% of contributions
- Foundation Series NZ Shares — allocate 20% of contributions
- Set up auto-invest: Weekly or monthly, minimum $50/week total
- Done — auto-invest handles regular contributions automatically
Annual maintenance: Once a year, check if your allocation has drifted from 80/20 and top up the underweight fund with new contributions.
Rebalancing a Two-Fund Portfolio
As global and NZ markets grow at different rates, your allocation will drift from target.
Example:
- Start: $8,000 global (80%) + $2,000 NZ (20%) = $10,000 total
- After 3 years (global outperforms): $13,000 global (87%) + $2,000 NZ (13%)
- Drift: 87/13 vs target 80/20
Rebalancing options:
- Redirect contributions: Add new money to the NZ fund until back to 80/20 (no selling required — no tax event)
- Sell and buy: Sell some global, buy NZ. Triggers a tax event in non-PIE funds; PIE funds handle this internally
- Accept drift: If within 5 percentage points, many investors do nothing
For PIE managed funds, rebalancing by redirecting contributions is tax-neutral and the simplest approach.
Two-Fund vs Three-Fund vs One-Fund
| Approach | Funds | Control | Complexity | Best for |
|---|---|---|---|---|
| One-fund | 1 (e.g., Simplicity Growth) | Low | Minimal | True set-and-forget |
| Two-fund | 2 (global + NZ) | Medium | Low | NZ/global split control |
| Three-fund | 3 (global + NZ + bonds) | High | Medium | Adding explicit bond allocation |
| Multi-fund | 4+ | Full | Higher | Experienced investors |
The two-fund portfolio hits the sweet spot for most NZ investors — meaningful control without meaningful complexity.
→ See: One-Fund Portfolio NZ
Frequently Asked Questions
Should I include bonds in my two-fund portfolio? If you’re young (under 45) with a long time horizon, a 100% equities two-fund portfolio is widely supported. As you approach retirement, adding a bond fund (→ three-fund portfolio) reduces volatility.
Does the NZ fund include dividends? Yes — both InvestNow Foundation Series and Kernel NZ funds reinvest NZX dividends including imputation credits. The imputation credits flow through to reduce your PIR tax.
How often should I check on my two-fund portfolio? At most, quarterly — and only to check nothing unusual has happened. Don’t check weekly or daily. The data consistently shows frequent checking leads to worse decisions (more likely to panic-sell in downturns).