Share market turbulence and KiwiSaver deposits: Keep calm and carry on saving

First home buyers hoping to use their KiwiSaver for a house deposit will be nervously following the share markets. The ongoing market volatility has seen KiwiSaver balances take a hammering in recent months, causing sleepless nights for many. Even the share value of sure-fire bets like Facebook plummeted by 25% in just one day. So, what's behind all the turbulence? And, more importantly, what do you need to do?

Causes of market turmoil

The emergence of Omicron has undoubtedly affected an already jittery market. The continued disruption to global supply chains is really starting to bite. And at the same time, governments worldwide are cutting back on supportive monetary policy. Inflationary concerns and rising interest rates have only added to the gloom and jumpiness of investors.

All up, it’s a heady cocktail, resulting in share markets tumbling across the globe.

Closer to home, all this turbulence has seen KiwiSaver balances also nosedive. And for first home buyers relying on their KiwiSaver to fund a house deposit, it’s been a painful ride.

Predictions around where share markets are going are as variable as the long-range weather forecast. Even the experts are divided about the long-term prospects.

While it’s alarming to see your KiwiSaver balance tumble, the following tips will help you successfully ride out the storm.

Keep calm and carry on saving

Don’t panic: The most important thing to do is not panic. Leading KiwiSaver managers are urging customers to stick with their investment strategies. They point to the fact that following the 2020 share market crash, many panicked investors switched their portfolios from growth to more conservative funds. However, this meant those investors failed to take full advantage when the markets bounced back.

Invest in a diverse portfolio: Having all your eggs in one basket is never a good idea. For example, once seen as solid investments, tech stocks have become risky. Shares in several hi-tech companies like Spotify and Tesla have plummeted more than 40%. A diverse portfolio of investments combines riskier options (think commercial property and shares) with more stable ones (cash or bonds). Diversifying means you are more likely to ride out the ups and downs.

Talk to your KiwiSaver fund manager: Your manager can provide expert advice on the best investment strategy for you. A lot depends on your financial goals and risk appetite. And if you are hoping to use your KiwiSaver for a home deposit soon, your fund manager will advise you on the best options.

Finally, make sure you carry on investing in KiwiSaver. With patience and time, KiwiSaver balances will bounce back for most investors. 

Article published 17 February, 2022