If you have an Investment Plan or KiwiSaver Scheme account you may have seen a dip in your balance this month.
Why did this happen?
Investment Plans and KiwiSaver are much more than just savings – they are an investment. Part of your investment may be in shares and we know that the share market can go up and down.
October is historically a challenging month when it comes to shares, and this year was no different. What might be comforting for you to know is that markets move up and down and we expect these things to happen, we just don’t know when. This time, share markets have had such a long run of good returns that even the smallest movement makes big headlines. It is interesting to note that In most cases, where we have experienced a sizable downturn, we have had an immediate ‘bounce back’ or significant growth thereafter, as shown in the history of the Dow Jones index:
• In 1931 it dropped 52.67%
• In 1933 it gained 66.69%
• In 1974 it dropped 27.57%
• In 1975 it gained $38.32%
• In 2002 it dropped 16.76%
• In 2003 it gained 25.32%
• In 2008 it dropped 33.84%
• In 2009 it gained 26.50% and in 2017 was up 25.80%
We now have experienced a further drop. Some of this is a reaction to the fact that it is 10 years since the last fall in markets, some of it a reaction to higher interest rates in the USA and some because of uncertainty what the USA trade war is going to mean to growth worldwide.
However, as fund managers work through these issues, and they become clearer, they then will continue to invest and this should see confidence in the markets. The good news is that worldwide basic economic fundamentals are all good – full employment, companies making money and fairly stable political situation. Any drop in investment is a paper loss only. Hence, you only experience a loss if you cash in the investment. It is a bit like having a house which is down in value – the best thing you can do is wait!
We’re here to help you
It’s times like this that highlight why Investment Plans and KiwiSaver are long-term investments, and why having access to quality financial advice is more important than ever. If you would like more information or to discuss whether you’re in the right fund to suit your savings needs, please talk to Daniel on 09-4144113.