KiwiSaver investors needed to keep a bit of perspective, Craigs Investment Partners head of private wealth research Mark Lister says. Image / Thinkstock
KiwiSaver investors needed to keep a bit of perspective, Craigs Investment Partners head of private wealth research Mark Lister says. Image / Thinkstock
People who want to take their money out of KiwiSaver in the near future should make sure they are in lower risk funds to limit their exposure to the recent volatility in global share markets.
But those with a longer time horizon should be prepared to ride out the ups and downs, according to investment experts.
Share markets around the world have been buffeted of late by the Greek debt crisis and fears of a slow-down in China.
Investors who own 5 per cent or more of listed companies as well as corporate executives and directors have been banned from selling their shares for six months on the market.
The uncertainty has spread to the New Zealand share market with its benchmark S&P/NZX50 falling half a per cent to 5737.44 yesterday.
Mark Lister, head of private wealth research at Craigs Investment Partners - New Zealand's largest broker - said KiwiSaver investors needed to keep a bit of perspective.
"While no one likes to see their investment go down as long term investors they should look forward to periods like this when prices fall out of bed."
He says that's because periods where there are extreme weaknesses create buying opportunities and where some of the best deals can be gained.
While people who buy individual shares look on nervously and try and decide whether to sell or buy more Lister says KiwiSavers have the advantage that the buying just happens every time the money is diverted into their accounts.
"That means you carry on buying through periods of weakness where as most of us are hesitant and miss out."
When those shares recover, and inevitably sharemarkets do recover, the KiwiSaver investor has won out by buying in at a low price - just like when items are on sale in a shop.
"If you are 62 your KiwiSaver should be in a conservative fund or if you are 22 and intending to take out that money in the next two years."
Mark Lister, head of private wealth research at Craigs Investment Partners
However Lister warns, that same volatility is no friend to those who need to get their money out within a two to three year timeframe either for retirement or for buying a first home.
"If you are 62 your KiwiSaver should be in a conservative fund or if you are 22 and intending to take out that money in the next two years."
Conservative funds have a much smaller percentage invested in shares and property - those investments seen as growth focused.
He also cautions against trying to beat the market by switching to a conservative fund now and then back to a growth fund later.
"It's really hard to pick the ups and downs. If you go back to a conservative fund you might do well for the next two to three months but as some point you will have to change back to a growth fund.
Uncertainty in the global market has been spilling over to New Zealand's share market.
"Chopping and changing only works if you have a good enough crystal ball to get back in at the right time."
And very few people manage to do that, says Lister.
"When things recover and if you are still there in a conservative fund you will miss out. Trying to time the market is really risky. Most people only get it right because of luck."
Non-Chinese investors would not have direct exposure to the whole index because of the lack of transparency and controls. Exposure is likely to be limited to specific stocks.
Binu Paul, managing director of Savvy Kiwi - an independent KiwiSaver research and advice firm - said direct exposure to either the Chinese market or Greece was likely to be fairly low for most KiwiSaver investors.
"Non-Chinese investors would not have direct exposure to the whole index because of the lack of transparency and controls. Exposure is likely to be limited to specific stocks."
He said it was likely the level of investment would be less than 10 per cent of a global investment portfolio.
"The impact would raise uncertainty but not cause a loss in the portfolio."
As for Greece, Paul said some KiwiSaver funds could have an exposure through a portion of the fund being invested into alternative asset classes like hedge funds but only around 2 to 5 per cent of a global hedge would likely be invested in Greece.
Paul said the average 25 to 30 year who was not looking to get their money out soon shouldn't even be looking at what was happening to their KiwiSaver fund today.
"I wouldn't even think about those things. You can afford to take a loss. You've got to expect to see negative returns in some years."
But he said in long term investing in shares and growth assets was the only way to beat inflation otherwise savers risked having the value of their money eaten away by the time they come to retirement.
Paul said savers need to make sure they were in the right fund for their needs.
