Everything is a bit up and down at the moment, including investment markets and therefore investment and KiwiSaver balances. Of course, the value of your investments (and your balance) goes up and down all the time, but the impact of Covid-19 has seen more movement than usual.
At the start of the month, markets dropped as investors all over the world tried to sell ‘riskier’ higher return investments, like shares, to turn their investments into cash in case they needed money quickly.
Then, towards the end of the month, as governments moved to put measures in place to support people and businesses through the crisis (like the New Zealand government’s wage subsidy), markets improved a bit and shares started recovering some of their value.
Still, global share returns fell 12.8% in March, much higher than the previous two months (January fell by 0.3% while February fell by 8.1%). The New Zealand share market followed closely. So, you can see why, for most of us, KiwiSaver balances have dropped.
You’d need a crystal ball to know exactly what’s coming next, but it’s safe to say that we can expect the ups and downs to continue for a while. Even after we get back to ‘normal’, the current challenges will have lingering impacts on markets. However, if you’re in the right fund or funds to suit your long-term goals and stick to your plan, you’re in a good position to come through this in a strong position.
It’s always important to keep a long-term view in mind when you’re thinking about investments and your KiwiSaver. It’s the first time most of us will have seen our balances go down like this, because we’ve had so many years of strong market returns. The downs, just like the ups, are a natural part of investing. Things like this have happened before and they will happen again.
If you can afford to continue to make regular contributions to your investments or KiwiSaver, you’re actually now buying investments at a cheaper price than they were a month or so ago, so when markets start going up again your balance will recover faster. If you’re not contributing right now, that’s ok too – just stick to your plan and don’t make any hasty decisions about changing funds. It can be tempting at times like this, but you could be worse off in the long-run.
For most of us, we don’t need our KiwiSaver for another 20, 30, or 40 years, so there’s plenty of time for markets to recover and ‘future you’ will be thankful you waited it out.
We can also talk to you about getting a plan in place to get you on track with your KiwiSaver – we’re here to help.
The important thing is to check you are in the right fund, and if you are, hang in there. You can check if you’re in the right fund using the AMP fund selector here or contact us for a review.