From your KiwiSaver to bolder investing, you’ll be used to seeing fluctuations in the market and witnessing your money go up and down. But should you be concerned?
How do you know when this little piggy should stay at the market or when this little piggy should go home?
The Financial Markets Authority (FMA) put out a quiz during Money Week at the start of September which stumped quite a number of respondents.
Question number six asked, “Choosing a low-risk fund means you can stop worrying about market ups and downs – true or false?”.
25% of quiz answers answered true. They were wrong! The answer is false.
The second most inaccurately answered question was “Funds with lots of shares and property have more ups and downs than funds investing mostly in cash and bonds – true or false?”
This true or false answer may surprise you too… The answer is true!
But John and Jane Doe won’t always refer to an organisation like the FMA for information. Given the amount of influence the media has, sometimes headlines can be a cause for misleading information and interrupting the market. For example, a simple misguided Tweet can cause sensationalist stories and result in sudden market volatility.
Remember back in August when Tesla’s Elon Musk put out a now infamous Tweet “Am considering taking Tesla private at $US420. Funding secured.” And their share price dropped by 7%? It wasn’t the first time their share price has been hit by a storm in 2018.
Earlier still in April, the company saw its biggest loss this year because a fatal crash of their ‘Model X’ car had garnered scrutiny in the press – plus they had a poorly timed delay in the release of their ‘Model 3’ car, leaving public confidence in the company reflected in their share price at their lowest point this year to date.
However, from what was considered a disastrously low share price of $252.48 in April, Tesla rose from the ashes to hit their highest point of 2018 at $379.57 a few months later. Ironically, the momentary high was also as a result of that Tweet.
So you see, you shouldn’t let fear be your motivator – reactive isn’t always good. This year’s Money Week theme of Weathering the Storm has cemented that even if the market seems like it’s suffering a downturn, that little piggy might well be better off at market.
There will always be peaks and troughs but if you were to, for example, move from a high-risk KiwiSaver fund into a lower risk KiwiSaver fund after making a loss, it’s likely you may just ‘lock’ in your loss with little chance of making it back up again. It’s also worth noting that even low-risk funds don’t have guaranteed stability.
The takeaway is not to panic and to get informed. And if you have any questions or concerns, talk to your Adviser. That’s what they’re there for!
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