Investing in a moving market

Money for Retirement

What happened to the markets in February 2018, and how did it affect New Zealand investors?

February 2018 provided the first breathless financial headlines for the year – on 5th February US share markets fell, and caused a ripple effect through the world. Headlines noted the 1,175 point fall in the Dow Jones index (Dow) was the largest one day point fall ever (but in percentage terms the fall was much lower because the markets were already near record highs). 

From a New Zealand perspective, the fall happened on Waitangi Day so there was very little investors could do about it except speculate on what the likely impact on New Zealand markets would be the following day. And that is precisely what happened – the term “bloodbath” was thrown around with alarming frequency, and someone casually glancing at the headlines would have been forgiven for thinking the second great depression had started.

A more detailed review would suggest something less alarming had occurred. The Dow started at 25,338, rose to 25,521 but ended the day down at 24,346. The following day the index rose back to 24,913. Over the two day period, the index had fallen 425 points, or about 1.6%. While a fall like this is not appreciated by investors, it is not earth shattering, and is just part and parcel of investing in shares. Sometimes markets need to correct themselves due to new information.

As a Britannia client your adviser would have already talked to you about the fact that markets will always go up and down – and this means that so will your retirement savings with Britannia (and any other investments you may have). Given the February fall in the US share markets, we asked Britannia Authorised Financial Adviser Wayne Becker to share his top 5 tips for investors in times such as these.
  1. Having a well diversified portfolio pays off in situations like this as you will not be overexposed to any one particular economy, industry company or asset class. At Britannia we simply refuse to invest our clients’ money in speculative opportunities and what we refer to as ‘flavour of the month’.  If it sounds too good to be true – then it absolutely is – there are no maybes.
  2. Most investors have a 20+ year investment time horizon, so there’s no need to be fixated with the daily value of an investment. It’s OK to feel nervous and worried by all the ‘noise’, it’s a human trait and to be expected. This doesn’t mean that you have to react – past evidence shows that those who make a ‘knee jerk’ reaction generally are worse off financially over the longer term.
  3. Just because your investment may have gone down in value that does not mean you are invested in the wrong fund, the investment is broken or that you have made the wrong decision. It’s all part of being an investor.
  4. In February the major global equities benchmark (called the MSCI World Index) was up by almost 60% between early 2016 and the end of January 2018. In February it fell by around 4.6% returning the index to mid-January 2018 levels. So in that context a market correction could be considered as being due or even overdue.
  5. Many commentators expect more volatility in the markets this year and more unexpected things (both good and bad) to happen – so you can reasonably expect the value of your investment to fluctuate more than you will have been used to recently.
As we all know the media love to sensationalise, so don’t believe everything you read and make sure you talk to your adviser if you are worried about something you’ve seen or heard in the news.

Please give your adviser a call if you wish to discuss your investment. However, be prepared to be told that, if your situation, your goals and your objectives have not changed, then the best strategy is simply to do nothing and get on with planning for your retirement.

This article contains information of a general nature only. It does not take into account your particular financial situation or goals. Investors should, before making any investment decision, consider their own objectives, financial situation, and consult their financial adviser. Past performance is not an indicator of future performance.


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Product Disclosure Statements for the Britannia Retirement Scheme and the Integral Master Trust are available from the Scheme's issuer, Britannia Financial Services Limited, phone 0800 500 811.

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