Q: I'm guilty of a panic decision — woe is me! I'm 67 and my wife is 58 and I will probably stop working in 12 months. We are mortgage-free, debt-free and both of us are still employed and in good shape. My wife intends to continue working until at least 65, job market permitting. She is not bothered with the state of her KiwiSaver moderate fund and is content to continue as is.
With my retirement pending, in the middle of last year I sought the advice of a Westpac financial adviser, which resulted in the moderate fund being selected. I recently watched my balance plummet. I desperately sought advice from Westpac, which told me that a financial adviser would not be available for the next week or so and suggested I do a risk-profile exercise, which pointed me to the conservative or cash fund.
I transferred everything to the cash fund but still felt very uneasy. So I cashed up and reinvested $140,000 in term deposits with a 2.8 per cent per annum return, locked in for six months.
In six months, if the market stabilises, I'll go back to KiwiSaver and invest what I plan to spend within three years into the conservative fund and put the remainder into the moderate fund. I have a bad feeling I should have done this instead of cashing in. Your thoughts, please.
Also, your April 11 column mentioned the NZX50 index has regained more than 40 per cent of what it lost from late February to late March. If only to punish myself, is there a NZX50 index site that graphs the state of the sharemarket, which we can look at to see what's happening?
A: According to the Oxford dictionary, a 1659 collection of English proverbs included "No weeping for shed milk". These days we cry rather than weep, and the milk is spilt, rather than shed. But the meaning hasn't changed. Take note of it.
What's more, you're not just cleaning up the mess, you're obviously learning from your mistake. So no more beating yourself up, okay!
One of the main things you, and a whole lot of others, have learnt recently, is that you're not good at coping with a falling sharemarket. I'm hoping, though, that you and your nervous mates also learn over the next year or two that the long-term market trend is upwards, and it's best to ride out a downturn.
However, you'll probably never be one for higher-risk funds. So your plan to put your longer-term savings into a moderate fund is sound.
When should you move back? You say after six months "if the market stabilises". But how will you know? We all tend to assume that whatever has been happening lately will probably continue, and that's fair enough with many trends. But not share prices.
I suggest that, regardless of what's been happening, you move your savings back into KiwiSaver in, say, three steps — a third in six months, a third maybe a month later and a third two months later. That avoids moving it all at what turns out to have been a particularly bad time. But don't muck around for too long. Get in there for the higher long-term growth than in term deposits.
On your last paragraph, here's the deal. If I tell you where you can watch the progress of the New Zealand and world sharemarkets, do you promise you won't try to time your re-entry to KiwiSaver, or any other investment moves? I hope every other reader makes a similar promise.
Okay, here's where to find the graphs:
You can look at different periods. "YTD" — year to date — is a good period to see what's been going on under Covid-19. For others wanting to check their risk profile, go to the KiwiSaver Fund Finder on www.sorted.org.nz and click on "Find the right type of fund for you".
Getting into shares
Q: Letter from the stock exchange, NZX: After seeing last week's Q&A about more investors asking about shares on social media platforms, we thought you might like to see some interesting data (see graph, left).
More retail investors are buying shares than retail investors are selling shares. This shows a net inflow into retail investment portfolios.
Historically, we have seen strong retail-to-retail sales of equities. Since the introduction of new participants and initiatives that have made the market more accessible to retail investors, we are really pleased to see strong continued growth in retail-to-retail sales. In the first quarter of 2020, retail-to-retail sales increased 43 per cent from the same period last year.
A: Big jump. Clearly more New Zealanders are suddenly taking an interest in the sharemarket.
Why are more individuals buying than selling? I asked NZX. "We don't have any visibility into the individuals, but an unverified theory could be that those buying are holding as an investment."
But every trade needs a buyer and a seller. So who has been selling more than buying?
Wholesale investors, buying for an organisation rather than for their own personal account. They include KiwiSaver and other managed-fund providers, pensions and so on.
That doesn't mean there's been a huge selling rush from wholesale investors, though.
"Retail investors typically trade in much smaller amounts than institutional investors," says an NZX spokesperson. "So it wouldn't necessarily mean there is any large selling activity from somewhere else."
Help for self-employed
Q: My question is regarding the declaration for the Covid-19 wage subsidy for people whose income has dropped. Can you please find out from the Ministry of Social Development what it means by the sentence in the declaration regarding drawing on cash reserves as appropriate.
It reads: "before making your application for the subsidy, you have taken active steps to mitigate the impact of Covid-19 on your business activities (including but not limited to engaging with your bank, drawing on your cash reserves as appropriate, making an insurance claim)."
Does it want self-employed to use up their personal savings before applying for the subsidy? It seems as though most applicants are ignoring this request.
A: Fair question. Jayne Russell, MSD's group general manager employment responds:
"Applicants for the wage subsidy should take active steps to mitigate the impact of Covid-19 on their business activities. We would expect applicants who have significant cash reserves to have considered using these before applying for the wage subsidy."
But many small business owners may not have money labelled "cash reserves".
Adds Russell, "For a self-employed person who does not have a clear separation between their business and personal finances, it may be that considering personal finances is appropriate, especially where they had planned to spend that money on their business.
"We expect people in this situation to assess what are cash reserves for their business and whether using them would be appropriate in their particular situation in order to apply in good faith."
It seems you don't have to have cleaned every last penny out of every personal account before applying.
- Mary Holm is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to firstname.lastname@example.org. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.