Falling values can boost KiwiSaver long-term

After some heart-stopping plunges in March, many are celebrating their KiwiSaver looks nearly recovered.

But at the risk of raining on your parade, I have two points to make: one, the market probably isn’t finished jumping around; and two, that’s not actually a bad thing.

Don’t forget, that’s what your KiwiSaver is. It’s not a cash bank account. It’s an account of investments, meant to grow and earn money for your future, so that you’ll end up with more money in the end than a savings account could have given you.

One of the ways you earn that extra money is by sticking around when the market takes a dive.

Nobody knows for sure what will happen in the future, including with investment markets.

But there are a few factors that are likely to impact things. For one, many businesses around the world are currently being propped up with Government stimulus spending. but that can only last so long.

For now, the SeptemberOctober period is one to watch. That’s when many of the overseas Government spending programmes are due to end and could signal more speed bumps.

But let’s go back to what’s important. How do you handle your KiwiSaver through this, and are you about to lose all your money?

Even if your balance does fall again, this might actually be a good thing for your future.

Sorted’s FundFinder (fundfinder.sorted.org.nz) has a great quiz that helps you figure out if conservative or growth is best for you.

A simple way of thinking about it is in terms of time. If you have 5-10 years, then you have enough time to let a growth account do its thing.

When your KiwiSaver balance goes down, you haven’t lost anything. It’s just the values of the businesses you invested into have gone down. That means, each time you get paid and put more money into KiwiSaver, you’re also buying cheaply. You snap up good businesses that have been caught up in the current craziness.

But after a few years have passed, a vaccine been developed, and life truly goes back to normal, you’ll also be on board with those companies when their values bounce back.

That’s when those who stuck it out will see their KiwiSaver balances boom.