Caroline Ritchie
BREXIT, or at least the threat of Brexit, has sent all the talking heads into spasms.
It certainly gave shares and currencies a few wobbles. Even our banks, usually quiet on the day-to-day volatility of capital markets, sent messages out on Facebook "Attention KiwiSavers - do not panic!" The hundreds of comments that followed some of these posts almost made me cry. The big one, watching one's savings decrease in value, caused the worst terror.
The reason, I suspect, is that when you sign up to KiwiSaver, the adviser you do it with has little time to bother with the education piece. They are there to sell, and sell lots.
The education around KiwiSaver comes down to the glossy and often 50-page brochure handed to you with a cursory "urge to read" comment. This is a darn shame, but of course is the way of the world in financial services. The thing is, KiwiSaver has brought financial services into everyone's living room. It used to be the preserve of large portfolio holders and experienced investors - clients who understand deep risk.
For hundreds of thousands of New Zealanders, KiwiSaver has projectiled them into a world which in a previous lifetime they may never have inhabited. No wonder it is scary.
There is the good news. It is very simple. I've said it before but I'm going round this bush again, anyway. The ONLY PROVEN way to make money out of shares is to be in a highly diversified, low-cost basket of them for a long time. Not gambling on one or two stocks, not "magic seeking", not speculating, not currency scalping. Those are sales pitches, not defined conclusions.
A "long time" means 20, 30, or 40 years. Not five days, or one year or even three years. Because in between you are going to have things like Brexit. And the Global Financial Crisis. And commodity crashes and terrorism and tech wrecks and asset bubbles.
I absolutely guarantee that these events, KiwiSavers, shall happen to you. Here is the pleasant truth on the other side - the markets get over themselves. They move on. They have pretty short memories. They always have done and barring a total nuclear winter if someone accidentally leans on the red button, or a huge asteroid, they always will.
All you have to do is get over yourself. Here is a helpful tip - I call it my Rolling Five Year Rule. I would call it my Rolling Ten Year rule as I feel that's far better, however ten years for many investors starting out is too tricky to envisage.
The Rolling Five Year Rule is super easy: each time you look at your investments, (I personally suggest HARDLY EVER LOOKING), you must be happy to be in them for another five years. You look and think, "Yup, this has another five, (ten) years to run, and I'm ok with that. I get that it goes up and down, but I know it's long term."
If you are looking every day and having palpitations, consider a) getting some help understanding what's in there and b) if that doesn't work you may wish to reside in a lower risk category.
You can choose which KiwiSaver timeframe you want to torture yourself with. Save yourself all that pain and make it an ultra-lengthy one.
¦Caroline Ritchie is a former AFA, sharebroker and portfolio manager. She runs Investment Stuff, a sharemarket based investment coaching service. Visit her at www.investmentstuff.co.nz. This column is not personalised financial advice.