Q I am in a KiwiSaver Growth fund. Over the past two months the value has been going down, down, down. I am 52 so this is still a long-term investment for me. I realise the fall in value is partly due to the war in Ukraine, and the rising cost of living. My question is, I have heard about "buying the dip" when markets fall. Should I do this by increasing my KiwiSaver contributions at this time?
A You are in a Growth fund, which means you have more shares than a Balanced or a Conservative investor. S
hares deliver better returns in the long run, but there will be sharper rises and falls along the way, as you are seeing now.
It is good that you are not considering bailing out on your Growth fund. Some investors choose a Growth strategy when markets are doing well, but get cold feet when markets fall and move to a lower risk fund, with the intention of moving back when markets recover. Not only do they lock in losses, but they are highly likely to miss the rebound when it occurs.
Should you "buy the dip"? This means adding to your investment when the price has dropped, in the expectation that it will bounce back in time. Investors who buy individual stocks may be tempted to buy more at a time like this, but they need to ask themselves why their stocks are down, and how long it may take them to recover? In the case of KiwiSaver, your money will be spread across a basket of investments, and your regular contributions will be going into your account every month.