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. The lowest blended fee in this guide comes from InvestNow's Foundation Series Total World Fund (0.06%) + Kernel NZ 20 Fund (0.25%); an all-Kernel Global 100 (0.25%) + Kernel NZ 20 (0.25%) keeps everything on one platform. 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 possible: InvestNow’s Foundation Series Total World Fund (0.06%) paired with Kernel’s NZ 20 Fund (0.25%) can blend 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.
Two-Fund Combinations in NZ Compared
Option 1: Lowest blended fee (InvestNow + Kernel)
InvestNow’s Foundation Series range doesn’t include a NZ-shares fund, so the lowest-fee combination pairs it with Kernel:
| Fund | Fee | What it tracks |
|---|---|---|
| Foundation Series Total World Fund (InvestNow) | 0.06% (plus 0.50%/0.50% buy-sell fee) | All-world shares (developed + emerging) |
| Kernel NZ 20 Fund (Kernel) | 0.25% | NZX 20 (NZ large caps) |
Total fee: ~0.10% blended at an 80/20 split (0.8×0.06% + 0.2×0.25%) Minimum: $250 (InvestNow) + $1 (Kernel) Platform fee: $0 on both
This is the lowest-fee two-fund combination in this guide, though it spans two platforms. 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 features: one platform, $1 minimum, auto-invest. Slightly higher fee than the InvestNow combination.
Option 3: Smart ETFs via NZX (0.40% + 0.20%)
| ETF | Fee | What it tracks |
|---|---|---|
| Smart TWF (Total World Fund) | 0.40% | FTSE Global All Cap (global developed + emerging) |
| Smart NZG (NZ Top 50 ETF) | 0.20% | NZX 50 |
Total fee: ~0.36% blended (at an 80/20 global/NZ split) Minimum: ~1 unit (approx $100–$150) Platform fee: Depends on broker (free via a direct Smart account; Sharesies instead charges 1.9% brokerage per trade, capped at $25)
Best if you want NZX-listed ETFs and intraday trading. Less convenient than InvestNow or Kernel for auto-invest.
How to Set It Up (Lowest-Fee Example)
- Open an InvestNow account at investnow.co.nz and a Kernel account at kernel.co.nz (15 minutes each, NZ ID required)
- Set your PIR rate (10.5%, 17.5%, or 28%) on both platforms
- Set up your two funds:
- Foundation Series Total World Fund (InvestNow) — allocate 80% of contributions
- Kernel NZ 20 Fund (Kernel) — allocate 20% of contributions
- Set up auto-invest: Weekly or monthly on both platforms, minimum $50/week total
- Done — auto-invest handles regular contributions automatically
Prefer one platform? Use Option 2 (all-Kernel: Global 100 + NZ 20) instead.
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
Where to check the latest data
Rates, fees and returns change often. Before deciding, check current figures yourself:
- Sorted Smart Investor: compares fees, returns and risk levels of KiwiSaver and managed funds.
- Disclose register: holds each fund's product disclosure statement and quarterly fund updates.
- Financial Service Providers Register: shows whether a provider is registered to offer financial services in New Zealand.
- The provider's own website: has its current rates, fees and full terms; these change more often than any comparison page.
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 — Kernel’s NZ 20 Fund reinvests NZX dividends including imputation credits, and the global fund does the same for its underlying holdings. 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).