Can KiwiSaver members handle a long investment downturn?
Financial experts warn that KiwiSaver members may be unprepared for a prolonged market downturn, especially as account balances have grown significantly. Analysts suggest that investors have become accustomed to strong returns and may panic if faced with a sustained period of negative performance.
Why it matters
Understanding investor psychology and market resilience is critical for long-term retirement planning and financial stability in New Zealand.
KiwiSaver members have seen many periods of market volatility through the almost 20 years of the scheme's existence, but could they handle a longer downturn?
Share prices fell in 2021 on the back of conflict in the Ukraine, in 2020, when Covid hit, and during the global financial crisis (GFC). The GFC was the most extended downturn of the main three, but at that point, most KiwiSaver members' balances were low enough that their contributions concealed the effect on investment balances.
Commentators said a longer downturn could be harder for KiwiSaver members to withstand, now that balances are higher. There are concerns that AI-fuelled stock price growth could go into reverse, which could hit those investors hard.
University of Auckland senior finance lecturer Gertjan Verdickt said investors tended to be loss-averse.
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