11 April 2018

    What do changing markets mean for your KiwiSaver balance?

    Markets got off to a bumpy start in 2018 — how could your KiwiSaver be affected?


    This year there have been a lot of ups and downs with markets, or volatility to use the industry term. You may be wondering exactly what that means for your KiwiSaver account. KiwiSaver is an investment not a savings account and that means you may see your balance go up or down, depending on what markets are doing.

    At Fisher Funds volatility is nothing new to us, it’s part and parcel of investing. The reason that the activity lately has been getting a lot of media attention is because markets have been abnormally stable in recent years. For example, in 2017 one of the major US share markets (S&P 500) went up every single month and that’s the first time that has ever happened!

    Why are markets fluctuating?

    There are a variety of causes of the current volatility and that can make it confusing. Some days it will be Donald Trump’s tweets that may have an economic impact. Other days it will be the rising price of oil, the risk of interest rates rising or fears of a slowdown in China. Interspersed with these moves will be days when the market focuses on the good news like the strong corporate earnings growth, rising house prices in the US or improving confidence in Europe. Ultimately these news stories can cause share markets to go up or down, and this is why your KiwiSaver balance may change from day to day.

    What could changing markets mean for you?

    You may see more ups and downs in the value of your KiwiSaver account than you have seen in recent times but when markets drop it can work in your favour!

    Two important considerations to be aware of are:

    1. When you need your money. If you have time on your side, then volatility is an opportunity. By maintaining regular contributions to a scheme like KiwiSaver through periods of volatility you may accumulate a larger retirement balance if the average entry cost is lower.

    2. Whether you are invested in the right strategy. If it has been a long time since you reviewed how your money is invested it might be worth checking. If you are closer to retirement or buying your first home it could be that a growth strategy is no longer appropriate - regardless of the market environment. If that is the case make sure you talk to our team and we can help you with this!

    Making the most of markets

    We are an active manager and believe that by selecting fundamentally sound, high quality, growing companies we can be confident that these companies will still be selling valuable goods and services regardless of whether the market is up or down.

    When markets are down we look for opportunities to strengthen our portfolios by buying more shares of the companies that we believe in. Effectively you might say we are looking to buy shares when they are on sale! A2 Milk is a company in which we have recently increased our holdings following share price weakness that we believe is temporary.