Investing in uncertain times

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Economic volatility has seen many KiwiSaver balances go down more than upwards recently, but financial experts are reminding people that KiwiSaver is largely a long-term investment, and to not freak out over bumpy balances.


"It can be disheartening if you’re contributing to your KiwiSaver account every month, and you’re not seeing big monthly account returns. But it’s important to remember that if you change your fund type, or withdraw your funds at this time, then you have very little chance of ever seeing those potential account gains," said Generate Adviser Bevan Kinraid.


"That’s because, technically while your balance may be down, you still have the same number of shares as before, it’s just that the value of those shares is down at the moment. Selling your shares or cashing out now, would mean locking in that lower price.


"Instead, if you hold onto those shares with a long-term strategy in mind, it’s likely they will return to, and exceed their previous value over time – giving you that long-awaited gain!"


Key drivers of the current market volatility include inflation, geo-political tensions and the price and supply of energy. And while central banks are trying to curb inflation by raising the cost of money, it’s anyone’s guess as to how long the economic volatility will last.


"You’d need a pretty good crystal ball to predict when this will be over, it’s very dependent on how quickly central banks can get inflation back down to more sustainable levels, and how much monetary tightening – interest hikes - will be needed to do this.


"We expect to see less spending and tighter household budgets, but not mass job losses. Confidence will get shaken with increased costs and house prices going down, and it could take a few quarters at least until we start to see that confidence return," says Generate Portfolio Manager, Ayrton Oliver.


Tips for not worrying about your KiwiSaver balance include not checking it regularly unless you’re about to retire or buy your first home, and remembering to take a long-term approach to your investment.


"We can look to history for confidence… Trust in the learnings from the past. We have had a 'business cycle' every 7-10 years, over time, share market gains will nearly without exception outweigh the losses," Kinraid said.


If you have time to reap the rewards of long-term investing, Oliver said moving from a conservative to growth type fund in uncertain times can be beneficial, as you’ll be purchasing shares and other investments at a lower value price and are able to take advantage of the recovery when it happens. Just make sure your appetite to risk is suited to a growth fund and you are comfortable with watching your balance fluctuate.


"Investing is a game of time. Long-term investing will likely produce returns; stay the course, by continuing to invest even when markets are going down, as you will be buying assets at cheaper prices which should generate healthy returns over the long run," said Oliver.


"In general, with your KiwiSaver investment, focus less on the day-to-day share price/unit price movements - let the Generate team do that for you."

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