KEY POINTS:
There is nothing to fear but fear itself, so the saying goes.
It's understandable that small Kiwi investors will be watching the financial meltdown in the United States and wondering whether their money would be safer under the mattress.
But the experts say it's extremely unlikely that a New Zealand bank or its Australian parent will fail.
"The finance company sector was our sub-prime market - that's the analogy," said Mark Lister, head of research at investment and broking house ABN Amro.
"So we've had that - that low quality part of the banking and lending market has already collapsed."
The BNZ's general manager of strategy and marketing, Blair Vernon, said Australasian banks were in a different league to the US institutions that had run into trouble.
Trading banks here were required to have more capital behind them, and disclose far more financial information.
When bank executives went overseas to raise money - as they all had to do, because of the lack of savings in New Zealand - they had trouble convincing potential investors of our low number of loan defaults.
"They're so small people think the decimal point must be in the wrong place," said Mr Vernon.
The need to raise overseas money was where New Zealanders would be hit hardest by the turmoil.
He believed the day was coming when floating mortgage rates would be lower than the traditional Kiwi home loan staple, the fixed rate, because of the cost of obtaining overseas money to back those fixed loans.
But credit generally was going to be expensive and that would affect all types of lending.
"I think it's questionable as to whether further cuts in the official cash rate [by the Reserve Bank] will be reflected ... "
The BNZ was advising homeowners not to fix their mortgages for too long. People were moving from the traditional two-year fixed loan to six-, 12- and 18-month terms, Mr Vernon said.
By that time interest rates would have come down and there would be some resolution to the credit crisis.
Mr Lister said people with money in the share market should not panic.
"We've got a defensive slant to all our advice and portfolios," he said.
This meant holding more cash than usual, and sticking to good quality companies with good balance sheets, strong cash flow, and management teams that had seen it all before.
Utilities such as TrustPower, or Telstra in Australia, were favoured.
At the same time investors needed to hold their nerve.
"There's no point riding all the way down, then panicking and selling and missing out on the equivalent ride up, which will inevitably occur," Mr Lister said.
The same goes for KiwiSaver.
The amount KiwiSaver accounts had gone down by was not a loss but a drop in value, and people needed to understand that concept, Kapiti Coast financial adviser Liz Koh said.
She believed the downturn was an excellent opportunity for people new to investing to learn that market cycles did work.
As well, people in KiwiSaver had a buffer of $2000 in government incentives, plus employer contributions. "So there's a huge margin before the employee contributions start to be affected by anything that's happening in the market. People are still ahead of the game compared to if they hadn't joined KiwiSaver."
