Market volatility and investments

What does Market Volatility Mean? 

Market Volatility refers to ups and downs in investment values. From time to time, we will see periods of heightened movements in value, usually linked to economic or other market events. What this typically means for things like your KiwiSaver savings or other investment products (like Investment Funds and direct shares), is that day to day balances or values can move up or down more than usual. As a result, this can put pressure on the value of your investments in the short-term. It’s important to note that volatility is a natural characteristic of investing in financial markets.

What effect can Market Volatility have on my investments?

When you invest in a managed fund like KiwiSaver or Investment Funds, your contributions are used to buy “units” in your selected fund. These units represent your share of the fund, which made up of a mix of assets - Growth Assets & Income Assets. The number of units you own does not reduce during periods of volatility, however it can impact the value of these units, moving them up and down. Think about this the same way you would by owning a share in a property - the value of the property can go up and down, however your share remains the same. 

What is the best way to manage Market Volatility? 

There’s no need to panic. Seeing your balance fluctuate can create understandable concern. Market downturns can happen and sometimes they can be big, but these ups and downs are a normal part of investing.

Stay focused on your long-term goals, check back in with your goal or get advice from an expert. Your investment goals, timeframe, and appetite for investment risk help decide the best fund option for you, and it’s important not to react to short-term events. History shows us that over time, share markets recover from temporary falls.

During the initial Covid-induced volatility period, around Feb-March 2020, a lot of investors moved their KiwiSaver accounts to lower risk funds. While this may have made them feel more comfortable initially, research from the FMA (Financial Markets Authority) suggests that this may have had a detrimental long-term effect on their savings. And as we know, markets recovered those losses and then proceeded to add significant gains.

Contribute regularly, if you’re adding to your investments regularly, then temporary dips can actually be good news. Continuing to add money to your savings while the market dips, could have a positive impact on your overall investment. This is because you are buying units at a lower price, so every dollar is buying more units in your fund than usual. Over time as the market recovers, these lower priced units can potentially improve your overall balance (or the value of the units you hold).

Make sure you’re in the right fund, from time to time your goals, financial situation, timeframe or attitude towards risk may change– if so, or if it’s been a while since you last checked in, periods like this are another reason to seek advice, to ensure you’re in the right fund, to reach your savings goal.

Stay up to date with information, we have a range of Economic Insights available to stay up to date with conditions likely to influence markets around the world. 

Where can I get guidance and advice on my KiwiSaver account?

Advice

If you have any questions about your KiwiSaver account, the easiest way to talk to one of our KiwiSaver Specialists is on 0800 272 738. They’re available from 8am to 8pm during weekdays, or 8:30am to 5pm on Saturdays. While you’re on the phone it’s a great chance to check that you’re making the most of your KiwiSaver account. We can take you through our KiwiSaver advice tool to check you’re on track - it only takes around 15 minutes.

Tools

If you’d prefer to do it yourself, as an ASB customer you can get digital advice through our KiwiSaver advice tool to find out which fund is right for you. We’ll take you through a series of simple questions and provide a recommendation on your options to make sure you’re maximising your savings towards your first home or retirement. You can complete this digital advice tool on our website, through FastNet Classic internet banking or the ASB Mobile banking app.

We also have other simple and easy digital tools for anyone to use at home. Use our KiwiSaver Calculator to revisit your long term savings projection and goal, or our Help me Choose tool to be reminded of your fund choice and why it’s right for you. 

Helpful resources

We have a range of useful web resources available. Our KiwiSaver Investor Hub webpage provides up to date market commentary, blogs, Economic Insights and the latest news impacting your investment in the ASB KiwiSaver Scheme. 

If you’d prefer to listen in, we have over 50 episodes of the ASB Investment Podcast to learn more about current market events. 

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