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Market volatility and investments

Last Updated: 11 Apr 2022

International markets are currently going through a period of increased volatility. What this typically means for things like your KiwiSaver savings - or other investment products that you may have like investment funds and direct shares – is that day to day balances and values can move around more than usual. Generally during periods like this, volatility causes these temporary movements to be down rather than up. 

How does a Ukraine-Russia conflict affect markets and investments?

Russia's invasion of Ukraine is sending shockwaves around the globe and world markets appear to be reacting to any news headline related to it. While there are ongoing discussions between international leaders to try and deescalate the situation, Russian forces are continuing their attack. Countries are still advising their citizens and representatives who are still in Ukraine, to leave as soon as possible.

Along with the impact this is having on the people of Ukraine and Russia and their lives, geopolitical events (as investors tend to label them) like this can affect different parts of the markets around the world. Oil and energy prices, global growth fears, economic sanctions – all lead to uncertainty amongst investors, which then can weigh on asset prices for periods of time. 

ASB partner, BlackRock’s Chief Investment Strategist Ben Powell says that this evolving situation warrants near-term caution. Yet we are also mindful that geopolitical tensions tend to cause short-term gyrations like the ones we’re seeing rather than become ongoing market drivers.

How often do things like this happen?

Volatile events like this happen more regularly than you’d think. Our recent blog in January features a chart showing major events throughout history and their impact on US index, the S&P 500. From a market standpoint, these events brought about volatility at the time; looking back now, the impact seems a lot less significant.  

Is ASB looking to divest from Russian companies?

ASB is in the process of divesting all Russian assets from its investment funds, in response to the Ukraine invasion. Various legal (including NZ and overseas sanctions laws) and practical restrictions (e.g., trading suspensions, existence of willing buyers) mean some assets are not able to be sold immediately. We continue to work to exit as soon as it is legally permissible and reasonably practicable to do so.

What does this mean for your ASB investments?

As we wrote in our recent blog and podcast, seeing your balance fluctuate can create understandable concern. 

Volatility is part and parcel of investing in products such as KiwiSaver or Investment Funds. Our teams continue to manage your investments and make adjustments to the changing market environment, while maintaining a medium to long-term horizon. As an individual investor, the best plan remains the same: sit tight, don’t check your balance every day and keep to your long-term goal or strategy

From time to time your goals, circumstances, and attitude to risk may change – if so, or it’s been a while since you last checked in - periods like this are another reason to get some guidance or advice. That advice can be talking to a specialist, using any of our tools, or getting guidance from articles and blogs. 

Where can I get guidance and advice on my KiwiSaver account?

Advice: If you have any questions about your KiwiSaver account, the easiest way to talk to one of our KiwiSaver Specialists is on 0800 272 738. They’re available from 8am to 8pm during the week, or 8:30am to 5pm on Saturdays. The team can work through any questions on your ASB KiwiSaver Scheme account and take you through our KiwiSaver Explorer tool.

Tools: if you’d prefer to do it yourself, you can use our simple and easy digital tools. Our KiwiSaver Calculator to revisit your long term savings projection and goal, or our Help me Choose tool to be reminded of your fund choice and why it’s right for you. 

Helpful resources: Our blog provides some helpful information on things to consider during uncertain times. Another of our recent blogs on the power of advice is recommended reading during times like this. And if you'd prefer to listen in, start with episode 41 of the ASB Investment Podcast.

Should I change my investment?

You should stay focused on your long-term goals and avoid reacting to short-term volatility. We know this can be uncomfortable but sticking to your long-term strategy is recommended if your circumstance haven’t changed.

During the initial Covid-induced volatility period, around Feb-March 2020, a lot of investors moved their KiwiSaver accounts to lower risk funds. While this may have made them feel more comfortable initially, research from the FMA (Financial Markets Authority) suggests that this may have had a detrimental long-term effect on their savings. And as we know, markets recovered those losses and then proceeded to add significant gains.

 


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