Market dips: Don’t panic but do get financial advice - Blog - BetterSaver
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Market dips: Don’t panic but do get financial advice

February 1, 2022

Joe Taylor
Joe Taylor

By Joe Taylor, founder, and CEO at BetterSaver

When it comes to money, no one wants to see their investment take a dip. It’s hard not to buy into the mass hysteria.

I started BetterSaver because I wanted to see Kiwis spend more time doing what matters to them while watching their nest egg grow. I wanted to give people access to trustworthy financial advice and empower them to make decisions that positively impact their long-term wellbeing.

I’ll give some context about the market drop, but if you’re feeling stressed about what it might mean for your KiwiSaver account, please don’t hesitate to book a meeting with our financial advisers or chat with the team online.

The cause:

One of the leading causes of the current dip in the share market is inflation. Put simply: The cost of things has risen over time, meaning you can buy less with the same amount of money. In essence, inflation has been caused by government’s central banks putting more money into circulation in order to stimulate the economy during the pandemic, which has had a flow-on effect resulting in higher interest rates. Higher interest rates mean the cost to borrow money is greater for businesses, which can impact their profits and earnings, which can cause share markets to drop.

What history has shown:

From time to time, the sharemarket takes a tumble. It can look and feel very frightening, but you don’t need to panic. Although history is no guarantee of what will happen in the future, these drops are generally short-term.

KiwiSaver is designed as a long-term investment. If you’re in the right fund for your risk tolerance and withdrawal timeframes, dips shouldn’t concern you. In addition, KiwiSaver funds will generally be well-diversified, which should cushion the impact of these dips.

What you can do:

One critical thing you should do is assess how long it will be before you need to withdraw your KiwiSaver. Market fluctuations shouldn’t be a worry for those who are several years, if not decades, away from accessing their KiwiSaver for their first home or retirement. However, you may still see value in checking in with your adviser to talk through the particulars of your fund’s performance, especially if you have any misgivings about it.

If you’re planning on withdrawing in the short-mid term (within the next three years), don’t panic, but do work with a financial adviser to create a plan that works for you.

The takeaway:

In times like these, it’s valuable to keep an eye on the market. However, we don’t advocate that you make knee-jerk decisions about your long-term finances.

Don’t stress about moderate market fluctuations. Leave that to the pros, and spend your time doing more of the things you love. Get in touch, ask the tough questions about your KiwiSaver fund, and then let us help you make the most out of your hard-earned money and investment.