COVID-19 and your investments

While COVID-19 restrictions in New Zealand are starting to ease up, and our financial advisers are available via phone or video conference or in-person meetings (with social distancing measures) to give reassurance and personalised financial advice as needed.

For the first time in over ten years, there is a serious correction in share markets and uniquely worldwide worries about the COVID-19 virus which has created panic in some people, even some in New Zealand. Many commentators and friends will express opinions about what you should do, but that advice can often be wrong.  The best thing for you to do will depend entirely on your personal situation and ability to avoid any panic-based behaviours. But here are our broad guidelines on how different personal situations should be addressed, that may be of some interest to you:

If you are saving for your retirement

If you are still 10+ years away from retirement, it is likely that your investments and/or KiwiSaver is invested in a growth-oriented portfolio (in Balanced, Growth or even Aggressive). These portfolios have 50% or more invested in shares and right now you will be impacted by the share market falls – your investments will be feeling this heat.  The Aggressive funds the most, to a lesser extent in Growth and less again in Balanced, because of the different percentages held in bonds, which are not decreasing in value.

The total value of your investments however fell sharply since late March.  The daily valuations have fluctuated significantly and possibly will continue for some time to come.  This can be nerve-wracking to watch as even within one day there can be significant changes. Our suggestion is that the best approach is to not check your investment account balance online as there is basically nothing you can do about it.  Largely ignore financial news.  In almost all cases you will still own all the same investments.  It is just that the market has decided that they are worth less right now. Keep saving and if possible contributing to your investments/KiwiSaver because by doing so you will be shopping at super special sale prices.  Plus you do not need the money now, so if you took it out or switched to a more conservative option you will miss out.  The equivalent of shooting your retirement in the foot.

Data shows that over the long term, growth assets (i.e. shares) will significantly outperform defensive assets (cash and bonds), however these returns do not come in a smooth fashion. In the short term, no-one can predict or forecast what markets will do, which is why now is not the time to make big changes to your investments. You will be rewarded for enduring this roller coaster ride which may continue for months or even perhaps three or four years.

If you are about to retire

If you are planning to retire in the next year or so, and likely to be needing to withdraw funds from your investments, we need to sit down with you and develop a plan of your likely cashflow requirements. The worst thing you can do is to switch your investments to more conservative options such as bank term deposits. This is simply a period of a year or four, which together we can cleverly navigate through, so that you do not compromise what you can financially do in the rest of your retirement years.

If you are already retired

Many of our clients take monthly or ad-hoc withdrawals from their investments to fund their living costs, and we typically rebalance these portfolios from time to time to have cash available for these payments. With the current inter-day sharemarket volatility, we are reviewing our client requirements on a case by case basis, and where possible, using existing cash holdings to fund withdrawals. All our clients hold bonds in their portfolio which provide capital stability. As time goes on, our investment committee guidelines also allows us to use the bond fund distributions (which are paid in cash) and draw down funds from the shorter-term fixed interest holdings to give growth assets the maximum possible time to participate in the eventual market recovery.

If you have any questions or would like to talk to one of our financial advisers, call us today on 09 478 6555.