After almost a decade of strong returns from the markets, the impact of COVID-19 has opened up a period of volatility and uncertainty across the world. And for many New Zealanders, this has reflected in a substantial drop in their KiwiSaver funds.

Feeling stressed or anxious about it is only normal, but in times like these it’s important not to let emotions take over. Here are some things to keep in mind.

Avoid making rash decisions

This market drop was notable because it happened so quickly, but your response doesn’t have to be. International research has shown that investor behaviour tends to be “irrational” and influenced by human emotions, which may hinder long-term goals.

It’s important to remember that timing the market is extremely difficult. It may sound counter-intuitive, but if you move from a growth KiwiSaver fund to a conservative one as markets fall (or when they are already low, like now), you may crystallise a loss.

Thinking about making a change to your investment strategy? Getting advice can help you understand what the implications of that could be. Remember, we’re here to help.

What are your goals?

One of the most important things to bear in mind is what you’re planning to do with your KiwiSaver money.

If you’re using it for retirement, and that’s still more than five years away, markets probably have time to do what they do best and recover. KiwiSaver is designed to be a long-term investment.

If you back out of the market now, you don’t have any chance to ride that wave up again when things improve. Waiting until things are better before diving back in is how many investors who sold when shares were low end up buying at the highest prices.

Generally speaking, fund managers say that – if you want your money in the next couple of years – a conservative fund may be the most appropriate option. Beyond that, you could probably take a bit more risk. For example, if you don’t need (or plan) to access your funds for more than 10 years, you could start to put a bit more money in now and take a bit more risk, to take advantage of this period when shares are “on sale”.

Just to simplify things a little, think of shares (or units in your KiwiSaver) as oranges. If you buy oranges every time you to go the supermarket anyway, wouldn’t it make sense to stock up when they’re in season and prices are low?

Of course, as we said, this is just a general rule of thumb, but the right strategy for you depends on your individual goals, attitude to risk, and investment horizon. Please don’t hesitate to contact us if you’d like to discuss how these key factors can influence your KiwiSaver decision.

Remember your gains

Your KiwiSaver balance is likely lower than it was last year, but markets have had such a strong run of amazing returns that you might have already benefitted to a greater degree than you stand to lose.

Remember: markets go up and down, but it’s the down periods that provide investment opportunities. People who have a plan, stay the course and know they are invested well for their goals are usually more likely to come out of a downturn in a better position than those who panic.

We are here to help

Like to learn more? Have a question or two? Please give us a call. We’d here to help you ride out this market downturn and prepare for recovery.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.