Who else has noticed a slowdown in their KiwiSaver accounts?
KiwiSaver has been going for nine years now, and for at least five of those nine years investors have enjoyed strong returns.
This has boosted confidence in the scheme and a renewed interest in saving and investing from many New Zealanders.
Signs that good times for investors may not roll on forever were seen at the beginning of the year, when sharemarkets fell sharply on fears of a slowdown in China.
After years of strong returns, many investors were poised to take profits and move to lower risk investments, accelerating the falls.
Sharemarkets recovered during April and May, but much of that has been undone by the recent Brexit vote in the UK.
The reality is that investors are nervous and growth investors are unlikely to see double digit returns this year. What do you do?
If you are in the right fund for your risk profile, and you believe that your fund manager is doing a good job, then you ride it out. Your KiwiSaver money is like water in a pond. If the pond is fed by a stream (your regular contributions) then the water level will gradually rise.
A flock of ducks may land in the pond and splash the water about, but if that stream keeps flowing then the water level will keep rising. At this time of year there is a top up from the Government into the accounts of all contributing members between the ages of 18 and 65, raising the water level further.
The bigger your balance in KiwiSaver, the more likely you are to be unsettled by a drop in the markets.
A drop of 10 per cent is more alarming to someone with $50,000 in their account than $5000. You should read up about your fund, and find out what the range of returns is likely to be.
The Sorted FundFinder tool has a simple three question risk profiling questionnaire which will help you decide if your fund is right for you.
The first question asks about your time frame. The longer your timeframe, the more volatility you can tolerate. If your timeframe is less than three years, the recommendation is to choose a conservative fund, no matter how much volatility you think you can tolerate.
The second question concerns your expectations. Some investors want a 'steady as she goes fund' with an emphasis on capital preservation, while others are happy to take more risk in the hope of much better returns.
The third question puts some numbers around those expectations. Lower risk investors can expect returns in the range of 0-5 per cent; returns for balanced investors may go from a 10 per cent loss in any one year to a 20 per cent gain and growth investors a 30 per cent loss to 100 per cent gain in any one year.
If your answers show that a growth fund is right for you, then you can expect some big ups and downs. How often are you looking at your KiwiSaver balance?
If you see it when you log in to internet banking, you can ask your bank to remove it from that screen. Checking your balance once a month should be enough for most people.
Someone who is very nervous about investment markets can switch to a lower risk fund.
A conservative fund may still have say 20 per cent in shares and go into negative territory over a 12 month period.
If that is too much uncertainty for some, there are also cash funds available which will give a similar return to a bank.
- Shelley Hanna is an authorised financial adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to firstname.lastname@example.org