Why is my KiwiSaver Investment Balance Dropping?
It’s not uncommon to check your KiwiSaver balance and think, “What happened to my money?” Seeing a drop in your balance can be worrying, but if you’re investing for the long-term, there’s no need to panic. As we’ve seen with events like Covid-19, markets can bounce back stronger than before. Understanding the factors behind the fluctuations in your KiwiSaver can help you feel more confident about your investment, even when the market isn’t performing as expected.
KiwiSaver is an Investment, Not a Savings Account
First, it’s important to remember that your KiwiSaver is an investment fund, not a traditional savings account. Your money is invested in a range of assets, such as stocks (businesses), property, and bonds (debt). This means your KiwiSaver balance will go up and down over time. These fluctuations are completely normal and, in the long run, can actually work to your advantage.
Why Your KiwiSaver Balance Might Drop
Several factors can cause your KiwiSaver balance to drop, but here are some key ones to keep in mind:
Changes in Global Markets: International events like political conflicts, trade disputes, wars, and recessions can cause markets to drop. If your KiwiSaver includes international shares, the value of those investments might decrease during tough times.
Interest Rate Changes: Shifts in interest rates can affect businesses, consumers, and financial markets. These changes can have a positive or negative impact on your KiwiSaver balance, as they affect the broader financial environment.
Different KiwiSaver providers and fund managers handle market fluctuations in their own ways. Some are more skilled at navigating volatility, while others might not perform as well. If you feel like your KiwiSaver investment is underperforming, it might be worth reviewing your fund and provider.
What to Do If You See Your KiwiSaver Balance Drop
If you’re investing for the long term, the best approach is to stay calm and ensure the fund you're in aligns with your investment goals. Resist the urge to panic and make quick changes. Moving your money into a cash fund, for example, might feel safe, but it could lock in your losses and prevent you from taking advantage of future growth when the market rebounds.
However, if you notice a significant drop in your KiwiSaver balance right before you’re about to buy your first home or retire, it can be incredibly frustrating. That’s why it’s crucial to regularly review your KiwiSaver fund throughout your life to help manage these risks. If a client approached us with plans to retire or buy a first home in the near future, we would typically recommend moving their investments to a low-risk fund. This strategy helps protect their savings from sharp declines, ensuring their money is more stable for when they need it.
Seize the Opportunity in Market Fluctuations
If you’re investing with a medium to long-term view, market drops can actually present an opportunity for growth. Here’s why:
Each time you contribute to your KiwiSaver, you’re buying assets - like stocks and bonds. When markets are strong, these assets are more expensive. But when markets dip, you can buy the same assets at a lower price. So, when the market recovers, your assets have the potential to grow in value.
Think of it like buying property. At its peak, the average house price in New Zealand was $1,064,000, but now it’s dropped to $916,000*. If you plan to hold onto the property for 20 years, buying when prices are lower is the smart choice, right? The same principle applies to your KiwiSaver. When markets dip, you’re buying at a discount - and when the market recovers, those investments can grow significantly in value.
Speak to a KiwiSaver Expert - Free of Charge
If you're feeling concerned about your KiwiSaver balance or just want some expert advice, we're here to help. At MoneyGuide, connecting with one of our advisers is completely free and easy. We’ll help you find the right fund and provider based on your goals - whether that’s higher returns, ethical investing, or a more stable approach.
We’ll regularly review your KiwiSaver over time to ensure it's performing as it should. If it’s not, we’ll reach out to discuss the best options for making it work better for you. And, if you ever have any questions or concerns about your KiwiSaver, you can rely on us to provide trusted advice every step of the way.
Get started today by filling out the form below, and we’ll be in touch to guide you toward a better KiwiSaver experience. Your future self will thank you!
*Source qv.co.nz/price-index
