October was a month for the history books. The S&P Index 500 fell 16 out of 22 trading days, this has happened only three times since 1928. Last month also marked the index’s worst October performance since 1970. On average, corrections – defined as at least a 10% pullback in the market – happen once a year. That means you can expect to see as many corrections in your life as you do birthdays!
Many people struggle to separate their emotions from investing when markets go up and down but reacting to current market conditions may lead to making poor decisions.
If you are still accumulating your retirement savings and are purchasing investments through your portfolio or Kiwi Saver managed fund, the fact that prices have gone down is fantastic news. You are buying more units or shares at a lower price – there is a sale on and you are getting a 10% discount. Your time frame is likely to be at least 25 years once you reach retirement age so any price adjustments now are likely to be of little consequence.
If you are already retired, no longer earning and are drawing down on savings you’ve probably got nothing to be concerned about either. The composition of your portfolio is most likely invested in a way to ensure lower volatility and the bulk of the portfolio will be bonds, term deposits and cash that are largely unaffected. You will also be unconcerned because you know there is little chance you will spend all of your portfolio funds any time soon.
Peace of mind is important to manging emotions and while it is uncomfortable to see volatility you know it has very little impact on your portfolio or your lifestyle. Our clients know what they need for a comfortable retirement and if there is a mismatch then we work with them to get the balance right so they don’t need to be concerned.
October has been and gone and the markets have since gained 2% – we didn’t hear or see about that though!
This information is general. A Disclosure Statement is available on request.