Dealing with the investment roller coaster

With New Zealand and the world facing an unprecedented pandemic, and global markets in uncertainty, clients are asking if they should make any changes to their investment plans.

Generally, when speaking to clients about how much risk they are prepared to take on and fund choice, when times are great – they will happily look at a fund with a return of 10% +. Inevitably that same fund is likely to have a loss in the future as high growth funds mostly invest in shares. Share prices go up and down and are affected by world events, so a return of 10% could become a loss of 10% when prices decline.

Because of recent market volatility, clients are wondering about switching funds, or initiating the switch themselves online. One of the primary roles of a financial adviser during turbulent times is to provide a “time-delay” from the client thinking about making a change to the client making the change.

Things to consider before switching funds

  • Investment is about timeframes – if you are investing for the long term (such as KiwiSaver) then you shouldn’t let short term events influence a long term outcome.
  • The market (particularly shares) will always fluctuate up and down – that is not necessarily a bad thing. History has shown us that in the short term, shares will bounce up and down however over the long term will grow faster than other forms of investments.
  • If you are making regular deposits, when the market does drop, you end up “buying more” to increase the “profit” when the market bounces back up.

Lastly, it is easy to be over confident when the market is going well. You also need to consider how you would react when the market isn’t going so well. If that is something that you would lose sleep over, then maybe you are in the wrong fund? 

With a nation-wide lockdown happening right now, and more time on our hands, this is the best time to discuss your investment strategy with your financial adviser.  

For advice around KiwiSaver and other investments, please contact Stephen France – KiwiSaver Specialist on stephenf@apexgroup.co.nz.

By Stephen France 


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