Clear the Shelves - Let's talk long term investments!

Clear the Shelves - Let's talk long term investments!
Mar 22, 2019

History has shown that panic-selling has never been a good idea for long-term investors. Drops in the market always are followed by recoveries, even if they take some time.

Looking at where investment markets are now compared to the last quarter of 2018, everything looks much more rosy, and that got me thinking about how quickly things change.

The analogy that nothing ever stays the same is certainly true in the investment arena.

For many of our clients with investments mainly in KiwiSaver and Managed Funds, they saw their funds drop and even with ongoing contributions, there was no sign of growth.

So, where am I going with this? 

I read somewhere recently about a supermarket analogy. You go and do your weekly shop and see your favourite item on special offer at half price. Instead of paying $4.00 they are down to $2.00!

In this case, most people would double up and but two for the price of one. Or you might decide that this offer is so good, that you decide to buy extra? The product is the same, the company that makes them is the same and the only thing that has changed is the price.

Now compare this to investment markets.  Your funds have fallen in value but nothing else has changed. The fund is the same, the company is the same but only market conditions have changed the fund price.

This is when we should all be looking to make the most of this opportunity and purchase more for a lower price. It’s not an easy thing to do but it can pay dividends. So next time you are in this position, take a breath and look at the big picture and consider making the most of a good buying opportunity.

The graph below shows a great example of this. It’s our own NZX 50 Index over the last twelve month. You can see how much share prices have risen even though there have been many ups and downs in the market.

Put emotion to one side over what has happened over the course of a few days or months and remember that you’re in it for the long haul.