The Nasdaq has already fallen around 30 per cent from its peak and other markets are heading towards bear market territory. Photo / New York Stock Exchange
The Nasdaq has already fallen around 30 per cent from its peak and other markets are heading towards bear market territory. Photo / New York Stock Exchange
The last time sharemarkets crashed around the world, back in March 2020, they bounced back within six weeks.
But there is no sign of that happening now.
The Nasdaq market is already trading about 30 per cent below its peak and both the S&P500 index and New Zealand's NZX50 aregetting close to bear market territory - a drop of more than 20 per cent.
The past two years have seen a big rise in small-time investors - often getting into the markets while they were stuck at home because of the pandemic.
And the rise of new investment platforms has made it much easier to invest in a range of markets, with the likes of Sharesies, Hatch, InvestNow and Stake all seeing a big jump in sign-ups.
"In terms of the markets our investors are trading in - and size of investment and number of investors - they are pretty steady," he says. "A big thing that underpins it is the auto-invest - people putting in $100 [on a regular basis]."
Watson says Sharesies has pushed the idea of dollar cost averaging - that $100 will buy more shares at the moment because prices are lower.
Continuing to invest over both bull and bear markets means sometimes investors will be paying more per share and sometimes they will pay less.
Its online investor community has also supported members worried about seeing the value of their shares drop, with others urging them to think about the long term and to stick it out.
But for many investors, this will be the first time they have seen a long-running fall in markets.
About 68 per cent of Sharesies users are under the age of 40, with the median age sitting at 32. The last time the markets were in bear territory was in 2009 after the global financial crisis.
Thirteen years ago those 32-year-olds were just 19 and had yet to fully join the workforce, let alone invest in shares.
Asked if this crash could drive a new generation of investors away from shares - repeating what happened after the 1987 crash - Watson admits some will be put off.
"There will be some people in that investor base, but I would say predominantly no and the reason I say that is the education which we have been putting out for the last three or four years.
"We have done a lot of thinking about how to stop that being the case."
Watson says Sharesies has focused on encouraging investors to diversify and not put all their eggs in one basket or one share, such as the hugely popular Tesla.
"We have put a lot of emphasis on trying to encourage diversification, so not just going into a Nasdaq 100 index but also thinking about the S&P500 or a global index. And not just going completely in on Tesla or Air New Zealand or all into GameStop."
Gus Watson, head of investments at Sharesies. Photo / Supplied
Kristen Lunman, chief executive of investment platform Hatch, also hopes the new generation of investors won't be driven away.
So far the only change she has noticed is investors putting in smaller amounts.
"There aren't fewer investors but they are investing less so the average investment has gone from around $580 and we are now hovering around the high $300s. What I would point to is we simply have less money to invest in our pockets and/or we are worried we will."
A quick poll of its users found 50 per cent said they were investing less, 25 per cent were putting in more and 25 per cent were not changing.
Lunman says there is chatter in its Facebook groups about whether this is the time to buy into the dip, but it is impossible to time the markets.
"There is going to be some more bumps this year so no one is rushing to get in. They are just happy to wait and see. I'm generally encouraged across the board."
Lunman says it is tough for the generation that couldn't get into the housing market and rely on shares and KiwiSaver to build their wealth, and now the rising cost of living means they have less to invest.
Oliver Mander, New Zealand Shareholders' Association chief executive, says he hopes investors are not deterred by the falling markets.
"I hope people aren't being turned off by what is going on right now. It does highlight a couple of things. Those old investment rules regardless of whether it is a bull market or a bear market, they don't change. It is about being diversified, sticking in it for the long haul, and what looks bad today will inevitably look quite good tomorrow - well not literally tomorrow, but in the future. It is a case of riding it out."
Mander says the worst thing people could do right now is sell because they could be getting out at the bottom.
He says there are many things that are different now, compared with past market falls.
"I think our corporate standards are better in terms of corporate governance quality, we have better regulations in place that means most companies have - they are reporting their financial results, disclosing details about their operations, that presents a far more accurate picture to investors about the financial health of a company. That is not something that was in place in 1987."
He says regulators are also far more active now.
"Yes there has been a huge increase in retail investors through the likes of Sharesies and Hatch, but also the relative amounts of dollars involved are actually quite small on a per investor basis and that is no bad thing.
"Those platforms have encouraged a whole generation of new retail investors who have at least now had some exposure to that and they will learn from this - they will learn from that transition from a bull market into a bear market and they will take those lessons with them.
"Losing $100 or $200 hurts now but actually in a longer term sense 40 years down the track when people will have higher valuations and more wealth, they won't forget the lesson they learned in 2022."
