Kathryn was recently interviewed for an article in The Post and The Press.
Article by Alka Prasad, 6 August 2024.
Expert advice to Kiwis concerned about the global market rout slashing KiwiSaver balances is to “ignore it and wait for the market to come back up”.
“It always will come back up,” National Capital director Clive Fernandes said. “It’s all noise in the short-term.”
A massive drop in global markets shouldn’t impact KiwiSaver investors, unless they were looking to buy a first home or retire soon, he said.
National Capital data shows that KiwiSaver funds had less than 5% exposure to Japanese markets, “so the impact of volatility there will be minimal”, Fernandes said.
“There is much greater exposure to US stocks (approx 30-50%), so there will be some impact there, especially for growth and aggressive funds.”
Clive Fernandes, Founder of National Capital says a massive drop in global markets shouldn’t impact KiwiSaver investors, unless they’re looking to buy a first home or retire soon.
Chris McKeen / Stuff
National Capital data shows that 60-70% of KiwiSaver investments are in growth funds with the remaining 30-40% invested in more conservative funds.
Fernandes said KiwiSaver was currently at around $100 billion so a 1% drop in the value in KiwiSaver would equate to $1billion.
“However, most investors, as long as they are in the right type of fund for their life stage and goals, should ignore these short-term fluctuations,” he said. “Conservative funds with fall a little less, theoretically.”
On Monday, Japan’s Nikkei 225 plunged 12.4% for its worst day since the Black Monday crash of 1987.
Meanwhile, the US Dow Jones index closed 2.6% lower on Tuesday morning, while the tech-rich Nasdaq index was down 3.4%.
Castle Financial Planning adviser Kathryn Alborough said market fluctuations were part of making long-term investments in diverse portfolios.
“Whenever you’re investing in growth markets, you should expect ups and downs along the way,” Alborough said.
The pandemic caused many KiwiSaver investors to switch out of aggressive funds, which meant they lost the benefits of fund growth when the market bounced back, she said.
“Stay the course, don’t have sudden reaction to stock market changes.”
Pulling out of international investments also introduces more risks to KiwiSaver investments, Alborough said.
“Most KiwiSaver funds have a bigger exposure to international markets, as they should do because the NZ market is so tiny,” she said.
Kathryn Alborough, financial adviser at Castle Trust Financial Planning, says market fluctuations are part of making long-term investments in diverse portfolios.
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Offshore KiwiSaver investments mean Kiwis were a safer bet, she said.
“If you’re investing in one market then you don’t have that diversity.”
Simplicity co-founder Sam Stubbs said the global market rout was a response to overinflated markets overseas.
“We’d all like to let air out of balloon slowly. The principle issue is that in a recession, the weapon is interest rates,” Stubbs said. “When reserve banks try to adjust interest rates, it’s like doing surgery with an axe.”
Stubbs said murmurs of a recession in the US and Japan were a sign of interest rates being too high for too long, compounded by “AI hype” overvaluing tech stocks in the US.
But he said that was expected with any new technology.
“Google had ups and downs in its early days. With AI, it’s very early which can be very volatile.”
Stubbs said a sudden lift in Japan’s interest rates “adds to the fact that interest rates are too high”.
“Financial markets hate uncertainty and change. The markets might be volatile for a while longer, you can never know.”
– Alka Prasad, The Post
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