For those who started investing in the past 18 months, your experience will have been punctuated by a slow, depressing decline in asset prices.
That’s due to unfortunate timing, but there are a few things you should keep in mind to ensure you stay on course.
Remember what you’re here for
If your investment objectives haven’t changed, neither should your strategy.
Most of us are investing in the hope of meeting our long-term goals, which are usually five, 10 or 20 years into the future.
With that in mind, there is little sense to react to weekly, monthly, or even yearly volatility, as tempting as it can be at times.
It’s likely that shares and property are still a key part of your long-term plan, and we know that over longer timeframes these will deliver strong returns with remarkable consistency.
Investing isn’t about chasing the ups and downs of the market, it’s about managing a well-constructed portfolio in line with your goals and objectives.
Stay diversified, there are always opportunities somewhere.
Shares get all the attention, but many investors also have conservative assets in their portfolio or KiwiSaver fund.
New Zealand corporate bonds had a rough ride in 2021 and 2022, as interest rates rose from the lowest levels in history to something more normal.
That process culminated with the five-year wholesale swap rate hitting its highest level since 2010 in October last year.
It’s fallen back since then, as investors have pounced on the highly attractive yields and also become more nervous about the outlook.
That’s led to fixed income delivering very solid returns in 2023, with the last three months proving to be the strongest period in almost three years.
Keep your eye on the long game
Shares and property are fantastic long-term assets that will grow your wealth, beat inflation and provide steady, growing income streams.
Since 1990, New Zealand house prices have risen 6.1 per cent annually, while New Zealand and US shares have delivered gains of 8.7 and 9.8 per cent a year, respectively.
Mark Lister is the investment director at Craigs Investment Partners.
However, the price we pay for those higher returns is volatility, which means we should expect plenty of ups and downs along the way.
Even in that relatively short period, US shares have experienced 15 declines of more than 10 per cent, four declines of more than 20 per cent, and there have been four recessions.
You’ll only do well if you can maintain a long-term mindset. The market always recovers from those periods, while the strongest gains often come as we rebound from the rough patches.
For new investors, recessions and rough markets are your friend
Who likes investing when the market is trading at all-time highs? Not me.
If you’re on the cusp of cashing up your share portfolio or selling your rental property, periods of market weakness can be awful, although people in that situation probably should’ve invested more conservatively anyway.
However, if you’ve got an investment time horizon of five years or more, relax. This too shall pass.
In fact, if you’ve got cash to put to work or you’re still in the accumulation phase of your investment journey, you should be rubbing your hands and hoping for more volatility so you can do more buying.
Lean on your adviser, they’ve seen this movie before.
If you’ve got an investment adviser, lean on them for support during times like this.
Market corrections tend to happen every two years or so, while recessions or bigger market falls typically come every 6-7 years.
Your adviser will have navigated periods like this before, probably more than once.
They can ensure you stay disciplined, keep your cool during unnerving periods, and help you stay on track.
Mark Lister is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser.
