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If we knew, that just like with the great depression, there was to be far more pain to come in equity markets, then I'm pretty sure you'd hear a lot of the experts saying you should get out right? Perhaps, perhaps not - the point though at the time of recording, is that it seems like the market has corrected, and it's more or less back on track. Is it plain sailing from here or is it going to get far, far worse.

In today's episode, were going to talk about what we all 'should' do when we see market volatility. 

I wanted to share some 5 quick facts about KiwiSaver in addition to today's recording: 

1- Just because KiwiSaver came out of a government initiative, doesn’t mean the government will guarantee the performance of your fund, or it’s safety. The strength of your funds performance comes down to who’s managing it not the government. Could the government confiscate your money? Nope – not under current legislation, and if that happened, I’d suggest they’d be coming for your property too at that stage – heck, we’d all have much bigger concerns then

2 - It’s really hard to get your money out of KiwiSaver if you’re going through a tough time I’ve observed. I mention that as I know some of you may be struggling right now. I’ve put out a whole episode on ‘financial prepping’ on episode 91 - that you may want to listen to if that’s you. If you’ve lost your job, you’ve already taken a mortgage holiday, you’ve used up your savings and you’re living day to day with no prospects, then yes, they may approve a hardship withdrawal application (not your KiwiSaver provider but the funds supervisor), but don’t count on it as your first line of defence.

3 - The KiwiSaver fund managers ‘style’, is really important – I’m talking about passive vs active management style – something we’ve covered a few times with Sam Stubbs, from Simplicity, and Mike Taylor, from PIE funds and Juno

If you’re with an active fund manager, some questions to ask of them would be this: How are the funds invested? How many changes are made to your investment mix between cash/fixed interest, property and shares? How does that fund manager actually arrive at the decisions that it makes? How have they reacted to the market movements we’ve seen in the last 12 months– have they simply tracked an index, or have they successfully allocated to cash at key times, then reinvested later on? I think during these times of volatility it really puts the acid test on these active managers – not only should they be outperforming the index when times are good, but presumably they’ll be limiting losses on the way down – so if you’ve been in the camp of individuals who have changed fund types in the last few months. An active manager should give you an extra level of confidence that you don’t have to do this – in theory they’re doing some of it for you.

4 - Your fund manager cannot steal your money! This is mostly understood by you I suspect, but if you’re like me, you may like a bit more details on how they can’t steal your funds. So enter the custodian, let’s say it’s the Public Trust as an example. They ultimately holds your funds. The fund manager makes the decisions on where the funds get invested, but ultimately the money is held on your behalf by a custodian. So let’s say you have an absolute shocker and you choose a fund manager who goes bust – don’t worry, because your money isn’t actually sitting with them – it’s held on your behalf with the custodian, and it would simply be transferred over to another fund manager of your choice. 

5 - It’s important you consider not just your fund type (ie conservative balanced or growth), but its essential to consider carefully the fund manager. Are you with a scheme which is simply an additional revenue source for a larger organisation, or are they devoted exclusively to funds management? Are the individuals who make the financial decisions on your behalf putting any of their reputation or even their business on the line – are they employees who don’t have skin in the game apart from their career progression? Are the funds invested across just Australasia or across the world? Are they socially responsible? Since KiwiSaver was set up and default providers were appointed, there’s far more choice now today around who you can appoint as your fund manager – like any choice you have though, it’s redundant unless you’re willing to exercise it every so often. I’ve had a few KiwiSaver providers on the podcast already: Koura Wealth, Booster, Juno, Craigs, and Simplicity – I don’t want to suggest these are the best, and in fact, part of the reason I’ve had them on was simply to learn more about them anyway. You should do the same (not host a podcast necessarily), but try to understand the wee nuances of what makes them special – in the process you’ll likely get far more engaged with investing so hey, it’s not a waste of time. Also, definitely chat to an authorised financial adviser too if you want some guidance around how KiwiSaver can form part of your overall financial plan

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Please ensure that you act independently from any of the content provided in these episodes - it should not be considered personalised financial advice for you. This means, you should either do your own research taking on board a broad range of opinions, or ideally, consult and engage an authorised financial adviser to provide guidance around your specific goals and objectives.

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Where to find Darcy Ungaro:

Ungaro &Co (authorised) financial advisers

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