The impact of the novel coronavirus (Covid-19) on global share markets understandably has many members nervous about their investment in the scheme. A correction in share prices in February has been followed by considerable volatility and the sharpest fall in share prices since 1987. Events are moving quickly which means any comment about the current state of play is quickly outdated. For this reason, you might be interested to follow the market updates provided by our investment manager, Russell Investments.
Remember, volatility is to be expected with growth assets like shares. Funds like our Growth option have performed very well over the past ten years, but with the potential for growth comes a greater risk of occasional losses in value. Past returns are not an indicator of future returns, and this is true in the short term as it is in the long term. When markets fall sharply as they have now, it’s natural to want to take action by moving to a more conservative fund. The danger with that approach is that you ‘lock in’ the losses and miss out any market recovery when it comes. Short-term events shouldn’t change your long-term approach.
However, if you need to access your funds in the short term, you may not want to risk your balance falling further if markets continue to fall. Unfortunately, all investment involves an element of risk and none of us knows what is around the corner. That’s why we recommend you stick to a long-term investment strategy based on your personal circumstances – especially when you expect to access your savings.
Given recent events, it might be a good time to start thinking about your investment personality and what level of risk you are truly comfortable with. Our risk profiler is a good place to start to work out whether you’re in the right investment option for your investment timeframe. It might help identify that a change in strategy is appropriate at some point in the future. It might also help you reassure yourself that your current strategy is the right one.
Legally, we can’t provide financial advice to individual members. If you are unsure about what to do, we recommend you get in touch with an authorised financial adviser (AFA). The Financial Markets Authority (FMA) website includes information about finding an FMA-licensed adviser.