Don’t panic, hold onto your shares

As coronavirus concerns grow, stock values are shrinking – but don’t panic and sell off all your shares.

US stocks took a sharp fall on Tuesday and New Zealand’s index dropped as trading began – though it later managed to claw back most of its losses.

Investors are being advised not to panic-sell, though there have been plenty of headlines which could unsettle those watching their shares or KiwiSaver nest egg.

Air New Zealand boss Greg Foran offered to slash his base pay as demand for flights tumbles, banks are forecasting NZ’s economy will go into reverse, and imports and exports with major trading partner China have been disrupted.

But those who work in the finance sector recommend sitting tight.

‘‘If [your investment] was in the right place before coronavirus . . . you’ll be in the right place after,’’ Nigel Tait Financial Planning Ltd principal Nigel Tait said.

‘‘The biggest thing to emphasise has to be the long-term nature of investing . . . the downturn as a result of coronavirus should not be encouraging you to change your strategy. Be in the right one, for the right reasons, and stay there. When coronavirus is dealt to, and it will be, in time, then prices will come back.’’

Sudden market changes such as this tend to be driven by fear or people’s impressions of events rather than fundamental change in the value of companies, he said.

It’s kind of an, it’s dropping away, I better get out, response.

Tait’s comments fit with analysis from Fisher Funds chief investment officer Frank Jasper, who said recent market drops were prompted by a combination of an increase in coronavirus cases – including Italy’s lockdown – and weekend news about an oil spat between Saudi Arabia and Russia.

Share prices don’t just plummet, Tait said.

‘‘Somebody has to be selling [shares] cheaper. For anybody to sell them, somebody else needs to be buying them. If people are willing to sell a $10 share at $7, there will be copious numbers of people willing to buy them at $7.’’

Investors should hold on to their shares instead of trying to respond to ‘‘every short-term move’’.

Retired people using KiwiSaver can have regular, smaller withdrawals instead of taking all the cash out while the market’s low, he said.

Tait says official cash rates could drop up to half a per cent over the next six to 12 months, to encourage growth – though it could affect inflation.