Market meltdown: Seven tips for beating the anxiety – Liam Dann

THREE KEY FACTS:

• KiwiSaver accounts are likely plummeting after a global sharemarket sell-off.
• Don’t panic! Volatility is normal in sharemarkets but they always recover
• Don’t panic! Repeat: Don’t panic

Liam Dann is Business Editor at Large for the New Zealand Herald. He is a senior writer and columnist, as well as presenting and producing videos and podcasts. He joined the Herald in 2003.

OPINION

1. Don’t panic. It’s probably not going to be as bad as all those screaming headlines suggest. This market correction is not unexpected. Everyone could see the tech bubble building. We knew investors would reposition for a more subdued United States economy and a lower-interest rate world. Unfortunately, selling off tends to happen a lot faster than buying up. These transitions rarely happen in an orderly fashion. Actually, they never do!

2. Remember rule number one: Even if things spiral and this sell-off starts to look like a serious crash, still don’t panic. Panicking never helps. This is not a repeat of the GFC. Major banks aren’t faltering, and the gears of the financial system aren’t seizing up. This is not 1987. Nearly 40 years on, we still don’t really know why that one happened. We know what is happening now. This is not the tech wreck of 2000... Well, okay. There are aspects of that one in the AI bubble. But remember rule number one.

3. Don’t look at your KiwiSaver balance. It will be ugly. But remember the number you saw on your account last week was an illusion. Wall Street had been on a stellar run this year (until last Friday), propped up by the tech hype driving shares like AI chip maker Nvidia. That was flattering your savings. The number you’d see today is also hypothetical.

4. Look forward and think long-term. Markets never lose in the long term. Unless you are betting on the fall of modern civilisation, then there is no reason to bet against markets. They consistently create wealth for investors. Just have a look at a graph of the S&P500 across 30 years (see below).

Look at the starting point, look at the endpoint, and rule an imaginary line between the two. That’s what most of us should be focused on. If you are a share trader, that’s different. But as Warren Buffett said this week: if you’re afraid of a market sell-off, you shouldn’t be trading shares.

5. Do look at what’s happening to inflation and interest rates. It might cheer you up. If you’re a mortgage holder the good news is that some banks have already dropped their rates again today. BNZ economists have called for an August cut to the Official Cash Rate (OCR). All this global market turmoil makes rate cuts likely to come sooner and go deeper. If you’re a saver, then deposit rates won’t be going the right way but you’ll still benefit from the disinflationary effect of a global sell-off. Oil prices have already fallen sharply.

6. Keep investing. If, like most of us your primary investment is your KiwiSaver, then that is easy. The upside of buying shares after a big fall is that they are cheaper. The fund managers looking after your KiwiSaver know this. They’ll be repositioning and looking for the best bargains.

7. Strap in and enjoy the ride. Read and learn. One upside of all the market drama is that it is very, very interesting. Let that motivate you to read and learn about what is going on. It’s an opportunity to come out of the meltdown with a greater understanding of finance and economics. Who knows, that might pay off in the long run.