If you’ve been keeping an eye on your Kiwisaver funds recently, you may have seen your balance dropping.
We know that's likely triggered the alarm bells but we’re here to tell you to pause and relax. Things are going to be okay!
We’ve got the lowdown on what’s going on with your Kiwisaver AND we’ll show you the best ways to protect those funds!
Here’s why your Kiwisaver funds may be dropping
A lot of people may see their balance dropping due to the current market volatility.
Market volatility is when the financial market experiences a period of increased risk, unpredictability and prices changing. There can be a number of reasons as to why this happens. For example, in recent times, the covid-19 pandemic’s pressure on local and international markets has resulted in a great deal of market volatility.
In the last month, there’s been an increase in market volatility due to a drop in the stock market. This drop can be attributed to a number of factors including the rising interest rates.
As prices go up and down, your Kiwisaver balance is likely to fluctuate. You may see big or small changes, depending on which fund you’re in.
While it’s impossible to predict how long and how intense this drop will be, the good thing to know is that it’ll only be for a short time as history shows the market always bounces back.
#1 rule is STAY CALM!
So even if you’re feeling worried about the dip in the market, you can feel relieved knowing that things WILL get better.
In fact, the most important thing is to remain calm and NOT go changing your Kiwisaver when you’re feeling emotional!
You don’t want to be like the 256,000 Kiwis who changed their Kiwisaver funds after the pandemic hit, which resulted in $820 million worth of losses to their funds! If these people had talked to a financial advisor, understood that changes in the market are normal and it always recovers- then they might not have lost so much money!
As you can see, keeping calm is the best thing to do to hold onto your Kiwisaver funds!
The top 4 things you need to do!
Now that you’re feeling cool, calm and collected, you can start to think of the best ways to protect your Kiwisaver funds.
Here are our top 4 tips!
1). Make sure you’re in the right fund for you!
It’s important to remember that not all Kiwisaver funds are the same. The main five are Defensive, Conservative, Balanced, Growth and Aggressive Funds. There’s also Life Steps/Stages funds which change the investments as the investor gets older and ethical funds which only invest in ethically run assets.
The way that these funds differ depends on how much of your fund is invested in Income Assets vs. Growth Assets. Income Assets are cash and bond assets that pay interest and mostly get their money back when the asset time-frame expires. While Growth Assets are shares and property assets. They can be impacted by market volatility but usually bring higher returns than Income Assets.
Each fund will have a different percentage invested in Growth Assets, with Aggressive having the most and Defensive having the least.
So it may be that your Kiwisaver funds are dropping quite a bit because you’re in a fund invested in a lot of Growth Assets! Make sure to check you’re in the right fund for your situation by consulting with a trusted financial advisor!
When the market is volatile, it’s a good idea to diversify your assets. Companies will react differently to changes in the market, so it’s important to make sure you’re invested in a variety of different assets. This will reduce the chances of all your assets dropping at the same time and your Kiwisaver losing all its value. You may even make a small profit as some companies succeed in times of volatility!
3). Think long-term!
With something like the pandemic, it’s impossible to know how long it’ll affect the market. So now is the time to think about the big picture. Think about your long-term goals and what is best for your future. This may mean changing your Kiwisaver investments (like investing in assets that are currently doing well) or sitting tight and getting through these more turbulent times. The most important thing to remember is that the market always bounces back. Even after the Global Financial Crisis in 2008, investors survived! So this time around, it might be best just to wait it out.
4). Buy instead of selling!
Often when there’s market volatility, investors will sell. But past events have shown that buying or holding onto your assets is the best thing to do! In the past during difficult times, investors have sold off their assets causing prices to fall. These investors ultimately lost out on profits when the markets bounced back and the prices went even higher! So make sure to think carefully about how you can get the most out of these volatile times. There is always an opportunity to make a profit when you buy assets at a low price. When the market comes back, you’ll see the value of your assets rise! So don’t underestimate the power to buy at times like these!
You won’t lose money!!
At the end of the day, if a part of you is still worried about your Kiwisaver, let us put it simply…you won’t lose money!
As we’ve already outlined, the market always comes back even during unpredictable times such as now. Historical research proves that the financial market recovers and continues to rise. While there is always an amount of financial risk when you invest in Kiwisaver, getting some advice from your trusted advisor will see you avoiding any heart-wrenching drops in your balance.
Also, Kiwisaver funds are a super secure fund to invest your money in as they’re regulated by the government. All Kiwisaver providers have to comply with the Kiwisaver Act 2006. So, you don’t need to worry about your provider going ‘bankrupt’ and taking your money as they simply manage your money- they don’t actually have it. Your Kiwisaver investment is stored in a trust that you are the beneficiary of. So regardless of what happens to your provider, your money is safe!
National Capital and their fantastic tool!
So if you’re wanting to make some changes to your Kiwisaver funds then we highly recommend talking to a trusted financial advisor.
Luckily for you, our good friends over at National Capital will definitely be able to help! National Capital are independent financial advisors that’ll give you great advice on your Kiwisaver. They’ll help relieve your financial worries, allow you to make informed choices and give you confidence in your investments.
You can start by using their FREE online tool Kiwisaver HealthCheck that’ll gather key information to provide you with tailored advice from National Capital on which Kiwisaver fund is best for your needs!
So if you’re unsure about your Kiwisaver, then talk to the good sorts at National Capital!
Don’t forget to use Money Compare!
As you look into your Kiwisaver funds, it’s also now a great time to check out and compare all your other financial plans!
Not sure the best way to compare your financial plans? Don’t worry, we’ve got you covered.
Money Compare is the best way to compare your financial plans. You can compare your home loan, car insurance, business insurance, personal loans and much more!
You’ll save heaps of money and find the perfect plan that meets your needs!
Best of all, it’s super easy to compare! Just jump on our website, enter in a few details, select filters that match your preferences and then you’ll see all the plans available to you. Then you can compare them all side-by-side on one page!
It couldn’t be simpler!
Alternatively, if you’d rather chat to a nice human, then give our friendly customer support team a free call on 0508 22 66 72. They’ll help you find the plan of your dreams!
So while it may be stressful to see your Kiwisaver balance dropping, don’t worry! Just follow our tips, check out National Capital and compare with Money Compare!
Best of luck Kiwis!
*This is only an educational guide for your Kiwisaver funds. It is in no means specific financial advice. Please consult a professional financial advisor (like the ones at National Capital) for any specific financial advice you may require.