Why has my KiwiSaver balance dropped, and what should I do?

What’s happened to KiwiSaver balances?

The latest Morningstar March 2022 KiwiSaver performance report confirmed what many of you already know, KiwiSaver balances have been falling across the board. Negative returns ranged from an average of -3.9% for the Conservative Category, to an average of -6.5% for the Aggressive (High Growth) category.

What has caused the falls?

The combination of high global inflation, interest rate hikes, the Russian invasion of Ukraine, and supply chain disruptions mean the global financial markets have faced stronger negative forces. Earlier this week the NZX share market hit it’s lowest level since June 2020, continuing the high volatility experienced over recent years. Unlike the fast rebounds markets have experienced since 2010, this time economists predict it will take longer for global markets to recover and return to a more consistent growth trend. The most challenging task for Governments worldwide will be tackling high inflation, largely a hangover from Covid stimulus spending by Governments.

Returns and risk go ‘hand in hand’

While recent falls in KiwiSaver balances can seem scary, KiwiSaver is a long-term investment for most people so it’s best to evaluate performance by long term returns. The recent Morningstar report highlights that over 10 years, the Aggressive category average has given investors an annualised return of 10.1%, followed by Growth (9.9%), Balanced (8.0%), Moderate (5.8%), and Conservative (5.1%). So returns and risk really do go ‘hand in hand’. Anyone promising high returns with low risk is a red flag for trouble.

What should I do?

Unless your KiwiSaver goal has changed recently, the experts in this recent Stuff article all agree. From academics to economists to journalists to financial advisers, the consistent advice is to sit tight and keep contributing regularly to your KiwiSaver. By doing this, you will be “buying cheap” while investments are priced low and benefit more from the recovery when markets eventually do rise.

If you have any concerns or questions about your KiwiSaver, you can contact Cam and the Nautilus team by emailing info@nautilus.net.nz or calling (09) 394 2011.