What's happened to your investment account balance?

If you’re a member of one of our KiwiSaver schemes, or an investor in one of ANZ’s investment funds, it’s possible you’ve noticed that your investment account balance has gone up and down recently. You might be concerned about what this means for your investments and so I want to explain what’s been happening and why there’s no cause to panic.

What's behind the fall in investment account balances?

Your money is likely to be invested in many different types of investments, such as shares, bonds, property and cash. What this means is that your investment account balance tends to go up and down in line with the rise and fall in financial markets. As you may have seen in the media, there were some big falls in global share markets towards the end of 2018.

Share markets don’t like uncertainty – and a number of things have combined to put investors on edge. In the US, there are concerns that rising interest rates may dampen growth in its economy and that company earnings won’t grow as quickly in this environment.

Other factors have also been in play; trade-related tensions between the US and China, mid-term elections in the US and ongoing uncertainties around ‘Brexit’. In New Zealand, economic growth has been slowing and business confidence has fallen. As a result, investors have become more cautious.

During the last three months of 2018, the leading US share market index fell by 14.0%¹. While New Zealand shares also fell, they proved more resilient, with the local share market index falling by 5.8%² over the same period. The declines in the US market wiped out all of last year’s gains and took it back to levels last seen in September 2017, while the New Zealand market was back to levels last seen in June 2018.

What does this mean for your investments?

It’s important not to panic when you see your investment account balance falling. Investment funds are generally intended as long term investments, so if you can stay invested, you should be able to recoup any recent losses.

The graph below shows that even when markets have taken a real knock, such as during the Global Financial Crisis when the US share market fell by over 50%, they can bounce back over time³:

The Performance Of US Shares Over 15 Years (1)

Despite the concerns that are hanging over financial markets, global economic growth is strong and we believe the fundamentals for share market performance remain in place.

We are of the view that once some of the current uncertainties (such as trade negotiations and Brexit) have passed, global growth will continue, albeit at a slower pace than what we’ve seen in the immediate past.

It’s also important to remember that falls in share markets provide good buying opportunities for active investment managers, such as the team at ANZ Investments. Our team continues to monitor the situation and has used the recent weakness in financial markets to buy into those areas of the market, and companies, which now present better value.

What should I do?

Market falls are part and parcel of investing, so it’s best to focus on what you can control. Here are some simple things you can do to make sure you’re prepared for periods such as this:

1.  Check that you’re invested in the right fund for your life stage and attitude towards risk. Our handy Risk Profile Tool can help you choose.

2.   Continue making regular contributions into your investment account, if you can. Investing through a market downturn means you can pick up investments at lower prices.

3.   If you’re still not sure and want some help, seek personalised advice from a financial adviser. If you don’t have an adviser, you can get personalised advice from ANZ's financial experts - it's easy and it's free, simply call our Wealth Direct team on 0800 269 238.

 

¹ S&P 500 Index, local currency terms, 30 September 2018 to 31 December 2018.
² NZX 50 Index, local currency terms, 30 September 2018 to 31 December 2018.
³ S&P 500 Index, local currency terms (rebased to 100), 31 December 2003 to 31 December 2018. Source ANZ/Bloomberg.

 

 Published January 2019

 

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