War, tariffs, election-year politics, market swings and a weak Kiwi dollar: there is no shortage of reasons for New Zealanders to feel uncertain about their financial future.
Yet uncertainty does not necessarily mean poor investment outcomes.
In fact, KiwiSaver returns have remained strong in recent years, even as investor confidence has been subdued, says Chris Tennent-Brown. He’s a senior economist at ASB Wealth, which has around $20 billion under management in its KiwiSaver funds on behalf of nearly half a million Kiwi.
“There are so many moving parts. We’ve had the uncertainty of tariffs, then the situation in the Middle East, and this is all impacting investor confidence” he says.
“But it’s not knocking down investor returns, particularly when you’re exposed to global shares via managed funds, sharemarkets, and KiwiSaver, which have performed incredibly well, despite the headlines.”
That apparent contradiction is a reminder that the news cycle and long-term investing do not always move in lockstep. Global tensions can shake confidence, but companies and markets may still perform strongly.
For KiwiSaver members, the key is not to react to every headline, but to make sure their money is invested in a way that matches their goals and timeframe.
Look beyond the election
Retirement policy is again part of the political conversation. KiwiSaver contribution rates, the future of NZ Super and the retirement age may all be subject to debate and change over the coming months, and years ahead.
Tennent-Brown says stronger incentives to save are welcome, especially when many New Zealanders acknowledge they need to put more aside for retirement. But constant shifts in policy direction can also be counterproductive.
“When things keep chopping and changing, it adds to the uncertainty, and that contributes to people’s lack of knowledge and understanding about KiwiSaver, which is a bit of an inhibitor,” he says.
While politicians debate the rules, most savers should resist treating an election as a trigger to overhaul their investment settings. A KiwiSaver investment horizon will likely span many political cycles.
“You shouldn’t invest cycle by cycle, you have to be in it for the long run,” he says.
That does not mean simply setting and forgetting. It means concentrating on the decisions within your control: whether you are contributing enough, whether your fund is right for you, and what you want your savings to achieve.
The fund matters
For Tennent-Brown, the most important step for KiwiSaver members is straightforward – check which fund you are in.
“It’s really important that you make sure your money’s working as hard as it can for you,” he says.
That could mean very different things for different people. A 25-year-old saving primarily for retirement is more likely to be able to tolerate the ups and downs of a growth-oriented fund, because they have decades for their money to compound and recover from the ups and downs of the markets KiwiSaver funds invest in.
But someone intending to draw on KiwiSaver for a first-home deposit in three months has a much shorter horizon. Taking the same level of investment risk could expose money they soon need to market volatility.
The question is not whether one fund is universally “best”. It is whether the fund suits the job the money needs to do – and when it needs to do it.
Why global exposure helps
The weak New Zealand dollar offers a useful example of why diversification matters. It hurts when buying imported goods, putting fuel in the car or booking an overseas holiday. But it can also help a KiwiSaver balance that owns offshore assets.
“At the moment, the weak Kiwi dollar is one of the things which is helping KiwiSaver balances that are exposed to those global markets,” Tennent-Brown says.
That global exposure is valuable because most New Zealanders already have a large share of their economic lives tied to this country: their job, home or rent, and the local property market.
The New Zealand sharemarket is also relatively narrow, with low or no exposure to businesses in overseas markets that are driving some of the strong growth in global share markets.
“Having that global exposure to different types of businesses – tech being a good example – is one of the reasons why we encourage people to think about diversification,” Tennent-Brown adds.
Make an annual date
The best response to uncertainty is not daily monitoring or chasing the latest market theme. It is an annual KiwiSaver check-up.
“Just like seeing the doctor and the dentist, you have an annual check-up. You can add checking up on your KiwiSaver,” Tennent-Brown advises.
Review your goal, your timeframe, your fund and your contribution settings. Consider whether your plans have changed. Perhaps you are buying a home, paying down a mortgage, intending to work longer, or planning the kind of retirement you want.
“At a very basic level, you should be doing a bit of a financial health check on your investment goals regularly,” says Tennent-Brown.
“We don’t know what’s ahead, but we know from history that regular contributions and compounding growth have helped millions of people enjoy their retirement.”
For guidance on KiwiSaver and investing, visit asb.co.nz/invest – because it pays to know what all your options are.