First home-buyers need to be particularly mindful of downturns, says researcher
KiwiSaver’s recent volatility may persist into the new year with the last six months seeing a potential emergence of a “bear market,” with investors considering selling or switching funds to protect their investment.
According to MoneyHub, the three worst performing funds of the last six months were AMP KiwiSaver, and Nikko AM Growth, ANZ Growth and LS Growth Fund also moved down by an average of 1.60%. The best performing fund was low-cost provider Simplicity, which provided a 0.62% return. Senior researcher Christopher Walsh says investors’ fears are not unfounded, as the market has seen significant falls over the past half-year.
“Global markets have recently been fairly brutal to KiwiSaver funds, and whether it’s the start of a bear market remains to be seen as 2018 comes to an end,” Walsh commented.
“New Zealanders have been spooked by the fall in their KiwiSaver funds and the fear is well-placed, with one fund falling close to 2% over six months”
“Whatever each fund is doing, the performance is well off the recent up-and-up results New Zealanders got used to. Worryingly, the next six months are going to be uncertain given the fears around trade tensions between the USA and China, low-growth global economic data and a US Federal Reserve continuing to increase interest rates.”
Earlier this year, the FMA encouraged New Zealanders to keep contributing to their KiwiSaver throughout any downturns wait for the market to re-balance. While markets are undeniably “a bit of a mess,” Walsh says KiwiSavers wanting to use their balance for a home deposit do need to be mindful of any potential downturns.
“First at risk is anyone considering using their KiwiSaver balance for a first-home deposit,” he stated. “It may be an idea to think about which fund they want to be in – any more negative returns could affect an individual’s housing affordability if their savings continue to shrink.”
