This article was published on 17 April 2020. Some information may be out of date.

Hope for the best, but expect the worst

If you’re investing in shares, always assume a downturn might be just around the corner — as recent events have dramatically shown!

The same applies to saving in higher-risk KiwiSaver and non-KiwiSaver funds — usually called growth funds or aggressive funds — which largely invest in shares.

This does NOT mean it’s best to avoid shares. They bring higher average returns over the long term. But it’s foolhardy to put money you expect to spend within ten years in shares or a higher-risk fund.

Your balance will fall quite often, and occasionally it could halve or worse. It will recover — it always does. But sometimes that takes several years, and you don’t want to be withdrawing the money in the meantime.

Why not just avoid shares whenever people are saying it’s likely the market will fall?

There have been large drops in both the world and New Zealand share markets in recent weeks. At the time of writing both markets had recovered a fair bit. But some people predict further falls.

Let’s bring Ruth into the story here. She’s recently moved back to New Zealand after living in the US.

“I have north of $US 75,000 sitting over there, some in term deposits, some just sitting in my bank account,” she writes.

“I plan to buy my first home in the next two or three years in Auckland, and this cash will play a part. In the meantime I’m not sure what to do with it. Term deposits are too safe and low return, but the stock market is perhaps too risky for the short time frame.

“Thoughts on what to do with the cash? Leave it in the US or bring to NZ? Invest where and in what?”

It’s not uncommon for so-called experts to predict recessions and share market downturns.

Sometimes an “expert” is right, and they gain followers who think they can time the share market — buying when the guru is optimistic, and selling when she or he (usually he!) is gloomy.

But sooner or later, and it’s usually sooner, the guru gets it wrong. There are so many factors that cause shares to rise or fall — including unforeseen natural disasters or disease outbreaks — that only a fool thinks they can gain by predicting market movements.

Heaps of research shows that people who get into shares and stay there, through the ups and downs, end up with lots more than those who attempt market timing.

It’s a good idea, though, to invest gradually. If you have a lump sum, perhaps divide it into three or four parts and drip feed the money in over several months — to avoid investing the lot at what turns out, in hindsight, to have been a bad time.

So where does this leave Ruth, who expects to spend her savings within a few years?

Not in shares, unless she’s a risk taker.

The disappointing truth for her is that she’d be wise to put the money in bank term deposits despite their low interest rates — shopping for the best rates on In any other investment, there’s too big a chance her money will lose value over a couple of years.

Ruth also faces another decision: should she bring her money here or leave it in America?

Again, she could try to forecast — this time the exchange rate between the US and NZ dollars. And again, it’s a fool’s game, only more so. While shares trend upwards over the long term, the value of one dollar against another moves down as often as up.

Two suggestions for Ruth:

  • Aim to get your money where you will spend it — in this case in New Zealand. You don’t want to find the exchange rate moving against you right before you buy your house.
  • Move the money gradually. Perhaps bring it here in $25,000 lots, spaced out over, say, six months. That way you won’t look back and see that you moved the whole lot at what turned out to be a bad exchange rate.

And good luck with the house buying!

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This column is supported by the Financial Markets Authority to encourage women to take an interest in KiwiSaver and investing. Visit for more information. Mary’s views do not necessarily reflect those of the FMA.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.