If you’re a first home buyer, recent KiwiSaver volatility might feel like a curveball in your home-buying journey. But don’t worry—understanding how to manage your KiwiSaver during these times can help you stay on track toward your dream home.
It’s natural to wonder, “Should I act now? Should I switch KiwiSaver funds?” Here’s a detailed breakdown to help you make informed decisions during turbulent times.
Why KiwiSaver Balances Fluctuate
KiwiSaver investments are tied to the sharemarket, which naturally experiences ups and downs. While these fluctuations can be unsettling, they’re a normal part of investing. The key is to focus on your long-term goals rather than short-term changes.
Steps to Take During KiwiSaver Volatility
- Review Your Fund Type
Your KiwiSaver fund type—whether it’s growth, balanced, or conservative—determines how much your balance fluctuates. Growth funds, for example, are more volatile but offer higher long-term returns. If you’re planning to buy a home soon, consider whether a more conservative fund might better suit your timeline.
- Understand Your Risk Profile
Your risk tolerance and investment timeframe should guide your KiwiSaver choices. If you’re unsure, many KiwiSaver providers offer tools to help you assess your risk profile and you can reach out to me to go through this with you.
- Avoid Emotional Decisions
It’s tempting to switch funds or withdraw investments during a downturn, but this often locks in losses. Instead, focus on your long-term goals and trust that markets typically recover over time. If you’re not looking to use your KiwiSaver in the near future, stay the course.
- Seek Professional Advice
A KiwiSaver adviser like me can provide personalized guidance, helping you align your investments with your home-buying goals.
The Bigger Picture
Remember, KiwiSaver is a long-term investment tool. While market volatility can be nerve-wracking, it’s also an opportunity to reassess your strategy and ensure it aligns with your goals.
By staying informed and making thoughtful decisions, you can navigate KiwiSaver volatility with confidence and move one step closer to owning your first home.
What First Home Buyers Should Do
- Stay Focused on Your Goal
Remember, KiwiSaver isn’t just an investment account—it’s a powerful tool to help you buy your first home. If you’re planning to use your KiwiSaver in the near future, this is the time to focus on how changes in your account align with your short-term goals.
- Double-Check Your Withdrawal Timeline
Are you planning to withdraw funds within the next couple of years? If yes, you may want to prioritise stability over growth. Market volatility can lead to short-term losses, which might reduce the amount available for your deposit. Being clear about your timeframe is key.
- Review Your KiwiSaver Fund Type
First home buyers should evaluate whether their current fund type is suitable for their timeline. Growth funds, for example, are designed for long-term goals and can experience sharp fluctuations. Balanced or conservative funds, on the other hand, may offer greater stability if you’re preparing for a withdrawal soon.
Should You Switch KiwiSaver Funds?
- Why Timing Matters
Switching funds during a downturn locks in losses. For example, if your growth fund has dropped due to market volatility, moving to a conservative fund now would prevent your investments from recovering when the market rebounds.
- Assess Your Needs
If you’re nearing your withdrawal date, switching to a more conservative fund can shield you from sudden dips. However, if your timeline is flexible, consider riding out the turbulence—markets often recover over time.
- Seek Advice from Professionals
First home buyers should consult their KiwiSaver provider or a financial adviser before making changes to their investments. An adviser like me can help you evaluate whether switching funds aligns with your financial goals.
Please do reach out to have a conversation about this and ensure you are in the right fund now, to meet your future goals. 🙂
