Author Katrina Shanks, CEO Financial Advice NZ Article originally published in

The stock markets in New Zealand and globally continue to be volatile, with some stocks taking massive falls. This is why you may have seen your KiwiSaver going down recently.

Why the markets have dropped is interesting

The United States has a big influence on the markets and, in most instances, some of the funds your KiwiSaver providers invest in.

These markets are expecting interest rate rises, and this is impacting on expected future returns of many stocks. In particular, the technology sector stocks have fallen significantly, forcing market averages down.

Even Bitcoin, the largest cryptocurrency, has lost about 50 per cent of its value since its record high in November 2021, and Ethereum has experienced a similar decline.

In addition, investors are concerned about supply chain disruptions caused by Covid variants and the conflict in the Ukraine. In the past few days, as Russia has moved to invade Ukraine, the markets have taken a tumble. That was all to be expected.

Here in New Zealand, we’re also seeing the Reserve Bank increasing the OCR, which will lead to interest rate rises, and the markets have reacted to the conflict in Ukraine and the expected Covid disruptions.

What does this mean for your KiwiSaver and what should you do?

There are a number of KiwiSaver providers and different types of funds, so let’s look at an average KiwiSaver balanced fund. This fund is made up of different assets with different allocations.

Here’s an example of how a balanced fund could look: cash and NZ bonds 26 per cent, international bonds 15 per cent, NZ unlisted/listed property 2 per cent, international listed property 2 per cent, New Zealand shares 10 per cent, Australian shares 5 per cent, international shares 39 per cent, other 1 per cent.

As you can see, overseas markets, which comprise about 61 per cent of investments, have a significant impact on your KiwiSaver, and though the New Zealand market may comprise just 38 per cent, together they ensure the risk is spread widely. The fund is also diversified across different asset types, which further spreads the risk.

However, in the past couple of months, markets have retracted across the board, and that is being reflected in managed fund balances declining.

The factors that impact on the market – interest rates, earnings of businesses, Covid-19 and potential and emerging conflicts – all affect your investment. All these elements are environmental and as individuals we have no control or influence over them.

If you have a KiwiSaver account, what should you do?

KiwiSaver is long-term investment for most people, and markets react to environmental changes constantly. History tells us that over a long period of time, markets have delivered positive results overall, so there is no reason to believe in the long term that this will change.

As long as you have assessed your risk appetite correctly and are in the correct type of fund and have had no significant life changes, then you can don’t need to change what you’re doing because of what’s happening with inflation, the supply chain, or the conflict in Ukraine.

If you’re looking to access your funds shortly, then I recommend you seek advice on what is right for you.

One thing we do know is if you sell your investments when the market has taken a tumble, you effectively lock in those losses. If you don’t need the money for some time (let’s say three to five years), it’s likely the best thing to do is to wait for the markets to recover.

The Financial Markets Authority looked at how investors reacted to the market fall in March 2020 and found some people – particularly the young – switched funds. In the event your balance has dropped and you’re concerned, maybe you should seek professional advice from a financial adviser.

At such times of uncertainty, I always feel better when I have taken some control, so here are some ideas of what you can do:

 – Make a plan to do a financial review.

– Make sure you have an emergency fund so you don’t have to dip into investments when the market takes a tumble. This fund will give you breathing space to let your investment recover.

– Be deliberate about where you have invested – make sure you’re in the right fund for your risk tolerance. Do a quick review for peace of mind.

– If you’re in KiwiSaver you’re already diversified – look at the value of your fund and if you have a high value for diversification, then see if you need to look at other KiwiSaver funds. If you’re managing your own funds through a platform, make sure your portfolio is diversified.

– Slow but steady payments reduce the risk of investing a lump sum one day and the markets turning on that day – this can reduce your risk.

– Stay calm – don’t look at the balances daily.

And yes, sadly I see my KiwiSaver and managed funds have dropped as well, but I’m staying the course because I know I’ve selected the right fund for my risk tolerance and these are long-term investments for me.

In the words of my adviser: you know you’re in the right funds long term, so stop looking at your balances and breathe. And again – breathe.

You are investing regularly and so remember, dollar cost averaging is your friend. We’ll catch up next time, review and discuss, and adjust if necessary.