A dramatic cut from the Reserve Bank this week puts focus on the potential for a downturn in the New Zealand economy.

But Kiwi Wealth general manger of customer, product and innovation Joe Bishop said local investors were overexposed.

More than 71% of New Zealanders did not think they had a diversified portfolio, Kiwi Wealth research showed.

The most common investments were property, KiwiSaver, savings accounts and term deposits.

“On one hand the data paints a healthy picture of New Zealand's investment landscape. Kiwis are saving more and investing money. They understand concepts like risk profile and diversification pretty well. That’s a good thing, since one of the most important aspects of careful investing is ensuring money is spread across a range of assets.

“So it’s a concern that nearly three-quarters of New Zealanders don’t feel they have a diversified portfolio.”

Bishop said it could make people more vulnerable.

“Kiwis already have a lot of exposure to New Zealand markets, be it through their jobs and homes, for example.

“That might be fine in the good times. But what about when the good times stall, or the New Zealand economy goes backward?

“You need other parts of your portfolio, including KiwiSaver, compensating. If you have everything going in one direction the danger is that everything can fall over at the same time.”

He said fund managers should better communicate with investors about the need for diversification, including taking a global approach.

“Given the Australasian market accounts for just 4% of global capital markets, the most effective way for Kiwi investors to diversify is to have some exposure to global opportunities.

“The need for options and expertise to access larger, more liquid global markets is essential to managing risk and maximising returns. That’s the primary role of an active fund manager, to balance risk and reward through proper portfolio diversification, especially in mainstream products such as KiwiSaver.”