NZ Herald 26 January 2019

AYou’ve got it upside down! If — and that’s an enormous “if” — you knew what was going to happen next to the share market, you should be buying more shares when the market is down and they are cheaper. It’s just the same as buying more apricots when they are cheaper.

But don’t worry about it, because you can’t know what will happen next. Not even the experts are any good at it. The sharemarkets might drop lots more soon — or resume the gains most markets have made in recent years.

It’s good to read that you’re relaxed about your balance going down, and you’re there for the long haul. Too many people have been needlessly worrying lately about market downturns.

But I suggest you don’t look at it as “losing money”. Only those who panic and switch to a lower-risk fund after a downturn are losers. Think, instead, of your savings going on a journey, with hills and valleys but almost certainly a long-term gain.

AAt least you’ve got it the right way up — wanting to buy more KiwiSaver units when the market is down. But, as I said above, there’s no way of knowing what will happen next.

People who try to time markets nearly always end up worse off than those who just keep drip feeding a constant amount into their account, regardless of what the markets are doing. Bonus: it’s much easier.

On the performance of your fund, it doesn’t look too bad to me. According to the KiwiSaver Fund Finder on sorted.org.nz, one of ANZ’s growth funds came fourth and the other seventh out of 28 growth funds, rated on their performance from April 2013 through September 2018. And it’s long-term returns you should look at.

More important, though, is the fees they charge. Past performance is often not repeated, so it’s best to largely ignore it. But fees rarely change. And on fees, the two ANZ funds came 15th and 16th in the Fund Finder.

I would normally recommend moving to one of the growth funds with the lowest fees — except that you hope to buy a first home soon, presumably with your KiwiSaver money. In light of that, I suggest you move your money promptly to a lower-risk conservative fund, so your balance can’t plunge right when you want to take the money out. Again, go for one of the funds with the lowest fees.

AYou make some excellent points.

In my reply in my last column I suggested the reader transfers the money she plans to spend in the next three to five years into a conservative or cash fund. But I added that the money she expects to spend later than that could stay in her medium-risk balanced fund, with perhaps some of the longer-term money in a higher-risk fund.

The idea is that every year or so you transfer some money from the high-risk to the medium fund, and some from the medium to the low-risk fund. The aim is to always have the money for the next few years in low risk, and not susceptible to market downturns. See the previous Q&A for an example of this.

But as you say, for retired people it would be better for the medium-risk fund to be invested fully in bonds, rather than a balanced fund mixture of cash, bonds and shares.

The following KiwiSaver providers have told the Commission for Financial Capability that they offer KiwiSaver bond funds: AMP, ANZ, Milford, OneAnswer, Summer and SuperLife. Note that some of these funds are called fixed interest funds.

If you’re not in one of those schemes, you can easily switch by contacting that provider. Or, if you’re retired, you could always move your money to a non-KiwiSaver bond fund.

Your final point about transferring dividends from a retiree’s high-risk fund to their low-risk fund makes lots of sense. Do any KiwiSaver providers offer this? Let’s hear from you.

AI’ve held onto this letter for months. Didn’t anybody ever tell you that you don’t ask New Zealanders about their finances!

But I suppose your question is fair enough. We all look at the dentist’s teeth, the doctor’s health and the hairdresser’s hairdo. So I’ve decided to start the new year with a burst of transparency.

The basics are: From my first job, I’ve always saved part of my income. At first that was to fund uni, then my OE, buying a first home and subsequent homes, and finally retirement. For decades, my long-term savings have been in low-fee share index funds, and over the years they’ve performed strongly.

I don’t think I’ve ever borrowed to buy a car or anything else other than a house, but instead used savings. I don’t like shopping, so that keeps the spending down.

It all makes me sound like a goody goody. Not so. I’ve splashed out on travel and concerts and plays. And because I don’t enjoy clothes shopping I’ve sometimes bought expensive garments just to get it over and done with! But I’ve always had an eye on the credit card balance, and been able to pay it off each month.

As a result of all this, I’m comfortably off. But I’m not rich, for three reasons:

• I’ve been a newspaper and magazine journalist for my whole career — although these days I’m also on a couple of boards. That means I’ve never made big money. I’ve had opportunities to move to something more lucrative, and worked in a big accounting firm overseas for a month once. But it wasn’t for me. I craved the chaos of a newsroom and moved back to a lower-paying reporter’s job.
• I’m a moderate risk taker. You might prefer investment advice from seriously wealthy people who got that way taking big risks. But they were also lucky. Many others who have taken big financial risks have bombed out. The trouble is, they don’t write books or run seminars about it, so the public gets a one-sided view — with the risks often under-played.
• A few things have happened in my life that have reduced my assets. They’ve had nothing to do with how well I invest or handle money. But — as many readers know — life doesn’t always run smoothly.

Still, I’m financially fine. As my new book — Rich Enough? A laid-back guide for every Kiwi — points out, once you get your money sorted and have reasonable savings, making more money won’t necessarily make you happier. It might even reduce your wellbeing.

In any case, unlike some writers, my advice is not based mainly on what’s happened to me. I have an MBA in finance, and have watched the markets and learnt from many different people’s financial journeys — partly from all you wonderful readers who have written to me over the years.