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Simon: Hiya Shona. So right now, the financial markets are all over the place due to a mix of reasons. Liberation Day in the USA saw the worst market performance since the end of the Second World War and rivalled by the 1987 stock market rut, the 2008 global financial crisis and the 2020 COVID shock. Every time you check the news there's new headlines screaming negative something at us about tariffs, stocks markets and political chaos. These global events, economic reports and forecasts, ongoing wars are all affecting investor confidence and adding to the ups and downs of your KiwiSaver & Managed Fund balances.
Simon: There is a quite a bit of noise about KiwiSaver out there right now. The best thing to do is take a breath and call your adviser if you need to! Your adviser is here for the longtime, not just a good time. So use us!
I always like to use this analogy:
Imagine you're on a rollercoaster. The ride starts off smooth, then suddenly, you hit a steep drop. If you panic and jump off in the middle of the drop, you guarantee injury. But if you stay seated, trust the safety harness, and ride it out, you eventually climb back up and finish the ride safely. We recommend staying the course and not reacting to short-term fluctuations.
· Unless you need your money out in the next year, avoid changing to a conservative fund or a different provider, as you will lock in your losses.
· KiwiSaver units are kind of on sale right now, so continue to contribute to your investment, as per normal. Might sound crazy but even make some extra voluntary contributions if possible as units are “on sale”.
· If you are not needing to withdraw anytime soon, try to check your balance less!
· Check in with us if you haven't had your investment settings checked for a while.
· In other words, Keep Calm and KiwiSaver on!!
The key thing in a volatile market like this is to not lock in your losses. So do give us a call!
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Simon: When KiwiSaver drops, the units are cheap!
Buying KiwiSaver units during a market dip is smart because dollar-cost averaging lets you buy low and benefit from recovery. Market downturns are like investment discounts—continuing or increasing contributions positions you for greater long-term gains. Go compounding interest you good thing!
Now is actually a really good time to contribute more because you are buying more for less!!
Simon: For first home buyers, seeing a chunk of your KiwiSaver disappear quickly is a major setback and can hamper your ability to secure your finance if you are buying today. This is pretty disheartening for those in that position. Interest rates are currently still dropping, so that may help their ability to get onto that ladder a bit later as 2025 progresses.
In terms of retirees, provided you are not withdrawing the lot right now, you may still have time in the fund to ride out the losses. People can live 30+ years beyond 65, so being in the right fund matters.
In a fluctuating market like this, there is a lot of noise around KiwiSaver coming from different providers vying for business. It is really important to give us a call before making any changes to your investment.
We can help you understand the impact of any changes and review your risk profile and investment timeframe to find the best approach for your situation.
As financial advisers we are focussed on your long-term outcomes and your bigger picture than simply getting another number on the books!
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Simon: It is challenging to pinpoint exact timelines for recoveries. Historic trends give us some comfort that they will recover, even through world wars, global pandemics, and recessions. The most significant drop in recently was during 2020 and the pandemic, it took some time, but they bounced back.
While this current period might feel a bit unsettling, it's important to remember that market volatility is a normal part of investing. Remember the roller coaster ride? Hang on in there and wait for the ride to climb again.
Simon: A couple of things really.
1.) Build up that emergency fund (3- 6 months of expenses) and don’t touch it.
2.) Keep contributing towards your KiwiSaver and stop checking it. Just let it do its thing in the background.
3.) Secure your income. Make yourself and your work is known and valuable in your workplace so (I hate to say it) you will be the least likely to get laid off if we hit a recession. Get a second job or a side hustle if you can as a buffer to fall back on if needed. You could even invest in a bit of professional development to give yourself an edge in the job market if needed.
4.) As always, keep chipping away at that high interest debt.
This article was written by Shona with Simon and peer reviewed by our financial advisory team.
Disclaimer: Shona is not a financial adviser. The above is generalised information that has been peer-reviewed by the Velocity Financial Advisory team. As always, before you make any financial decisions, discuss your situation with an adviser from Velocity Financial, and seek advice from professionals, such as a lawyer and accountant, to find the best solution for your unique situation.
About Shona: Hi, I'm Shona, the communications and marketing support person for Velocity Financial. Designing effective communications in a complex industry such as Finance is a worthy challenge. Finding ways to bridge gaps between complex financial information, and the everyday needs of people trying to navigate that world through informed choices, is something that I relish. I love deciphering and disseminating the expert knowledge and ideas of our clever team, into simple messages that speak directly to our clients, who are hungry for more knowledge and better understanding (like me!). In my outside life, I am a keen photographer and, like others in the team, I have a passion for the outdoors, hiking and mountain biking. I also train in martial arts and have been known to wield a sword on occasion.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too, together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures https://www.velocityfinancial.co.nz/disclosure-statement.