Craigs Investment Partners, 22 April 2020

As the COVID-19 situation continues to affect markets around the world, you may be wondering what this means for you and your KiwiSaver account.

While no one can predict how the current situation will play out, after living through numerous other downturns we can offer some sage advice on how to manage its potential effects.

In this article we answer some commonly asked questions.

Should I be worried if my KiwiSaver balance has dropped?

Unless you need your money very soon, the best course of action could be to stay put. It is never nice to see your balance dropping, but if your goals and circumstances are the same as prior to the COVID-19 pandemic, then your investment strategy should remain the same. At the end of the day it’s natural for markets to fall from time to time and we would expect to see markets rising again in the future.

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With my KiwiSaver falling, should I stop my contributions?

If you are still in a position to continue to make contributions, then there’s no reason to stop. While seeing the balance of your KiwiSaver fall can be un-nerving, another way to think about it is that you’re now effectively buying shares on sale.

The nature of KiwiSaver also enables you to benefit from what is known as dollar-cost averaging. This means the impact of prices going up and down (volatility) is reduced as you invest equal dollar amounts at regular intervals throughout both good and bad markets.

As an example of this, say you wanted to buy $3,000 worth of Ryman Healthcare shares in the first quarter of 2007, some time before the onset of the GFC. Hypothetically, you could’ve bought them all at once at a price of $2.15 or you could’ve spread your purchases over a number of quarters (let’s say 12 – so $250 each quarter). The chart below demonstrates that as the share price fell, you were able to buy a greater number of shares at lower prices with each instalment.

Dollar-cost averaging in action


This increased the value of your holding at the end, with the dollar-cost averaging approach resulting in an end value of $3,517, compared to a value of $2,902 if you had bought in a lump sum at the start.

The dollar-cost averaging approach protected the downside

table dollar cost averaging or lump sum investing2

So stick to your plan, stay the course and keep your focus on the long-term. However, if you do really need to stop your contributions, you can take a savings suspension. More info on our KiwiSaver FAQs page >

I’m in a growth fund. Should I switch to a conservative fund and when things settle down then switch back?

We recommend that any decision to switch funds is based on your risk appetite and when you will require your funds. Timing the market is very difficult, so we suggest that you visit our understanding investment risk page, and talk to your investment adviser. We’re here to help you in these uncertain times.

How long will the COVID-19 downturn last?

Nobody can predict how long this downturn will last, but we anticipate that there will be a recovery. We suggest just contributing as normal (with regular instalments) if you’re able, to help protect you from the effects of the volatility that we’re likely to experience in the near future.

I’m at the start of my investment journey – what should I be doing?

If you’re still looking to accumulate quality assets or you’re a younger investor, you should look at periods like this as an opportunity. Why only buy companies when their share prices are at all-time highs?

I’m close to retirement and will need my money soon – what should I be doing?

This is the time to check your risk profile and talk to your adviser about how to get the most from your money.

Is it important to check my KiwiSaver every day?

In the age of information, it is likely you’ll find yourself wanting to check your balance often. However, doing this might just make you worry more and potentially lead to bad decisions. Investing is a long-term game and short-term changes in your KiwiSaver balance are normal.

Are there any silver linings from this situation?

Downturns could be a good time to buy that company you’ve always wanted to own but have thought too expensive. You may find yourself with additional savings at this time, or you may need to tighten your belt. Take a breath and reassess your financial position. We recommend getting advice and ensure your investments match your risk profile.

How can Craigs help me appropriately manage my KiwiSaver investment?

Craigs was established in 1984 and over the subsequent 35 years or so we’ve experienced many notable market events – both good and bad. The advice we offer through our network of investment advisers is your biggest advantage in achieving your investment goals. Now is a great time to use our knowledge and expertise to help you navigate the current situation. All of our advisers are supported by one of the largest research teams in New Zealand.

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