The outbreak of coronavirus is affecting share markets and economies around the world. You probably noticed your KiwiSaver balance has dropped. So, is it something to worry about?
Try not to panic
When events like this affect markets, it’s best not to panic. Your KiwiSaver balance might have dipped, but try to stay calm.
In the past, markets have been quick to recover from these types of outbreaks (SARS and Asian bird flu were good examples of this), and the markets are still hovering near record highs.
How quickly China and other countries respond to control the outbreak will dictate future market reaction. All eyes are on how quickly the outbreak is contained.
KiwiSaver is a long-term investment
Your KiwiSaver money is often invested in shares on the share market, so is subject to market volatility. When the market rises and falls, your balance can increase or decrease. Sometimes gently and gradually, sometimes sharply.
When your balance dips, it’s usually not a cause for concern. Over the long term, your balance is expected to grow.
Should I change my fund?
It’s important your KiwiSaver money is in the right fund. Your fund type (for example, growth, balanced, conservative) should be based around your risk level. Your risk level is how long you will have your money invested in KiwiSaver, and how comfortable you are with investing.
But if watching your money go up and down makes you very worried, you have a few options. You can try to get used to the ups and downs, and the longer you’re invested you’ll probably get more comfortable with any ups and downs.
Or you might not be in the right fund for your risk level.
I want to change funds
If you're planning to use your KiwiSaver money in the next few years and thinking about switching due to the ups and downs it might be a good idea to hold off for a while. There could well be a bounce back in the market in the short term that will recover some of your losses.
If you plan to use your money for a first-home deposit in the next few months, you'll need to consider what feels right to you.
Switching now will mean locking in any losses, but you can move forward with some certainty about what your balance will be when it comes time to settle.
You can also choose to stay in the growth fund, if you're in it already, but this could mean things get worse before they get better. And if you're relying on your KiwiSaver balance for the bulk of your deposit, this could affect the amount you are able to borrow for your mortgage.
Avoid changing your fund type because of ups and downs in the market. Think about your investment time frame, and make sure your fund reflects that.
If you’re worried, or confused about your fund type, give your KiwiSaver provider a call. They are there to help you understand, and give you information about, your account and balance.
Published 12 March 2020
Pie Funds Management Limited is the issuer of the JUNO KiwiSaver Scheme. You can read our Product Disclosure Statement. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with an independent financial adviser. All content is correct at time of publication date.