This article was originally published in the NZ Herald in January 2023.
Uncertainty in financial markets is okay
Historically, there are always negative news headlines and worrying world events. These events always offer seemingly good reasons to sell your investments and run for the hills.
But share markets are remarkably resilient over the long run. There is an old adage on Wall Street that says “markets climb a wall of worry”. That means there is always something to worry about, but markets can still climb. While the “wall of worry” feels particularly steep at the moment, over the long-term share markets go up as economies grow and companies generate higher profits. Famous investor Warren Buffet is known for saying that in the short term share markets go up and down, but in the long term they go up.
If you invested US$100,000 in the S&P 500 index (500 largest companies in the US) in 1986 and sat tight you would now be sitting on a nest egg of circa US$4.4 million – setting yourself up for a very comfortable retirement. The hard part is to maximise long-term returns, you must stomach the inevitable ups and downs of share markets along the way.
It’s important not to be influenced by all the short-term negative news headlines and world events. There will always be something to worry about – but to really grow savings and reach investment goals, stay the course and ignore the short-term noise.
Goal setting helps
Setting goals guides your focus and sustains momentum by giving you something to work towards. Goals give oxygen to dreams and are the first step in achieving something special.
Sometimes the hardest part of goal setting is simply starting. The sooner you begin, the sooner you’ll be on track to achieving your financial objectives. So, set aside some time, boil the jug, and sit down in front of a blank sheet of paper (or a blank Google doc) and get going.
Don’t forget that a dream written down with a date becomes a goal. A goal broken down into steps becomes a plan – and a plan backed by action becomes reality!
Make the most of KiwiSaver
KiwiSaver is a long-term investment. For many people, it will become one of their main sources of income in retirement. So make sure you’re making the most of it.
We all want peace of mind when it comes to our money. Getting in the right fund and choosing a KiwiSaver provider you trust, who offers investment expertise and easy access to specialist financial advice, is a great place to start.
Expert financial advice more accessible than ever
Historically, financial advice has been seen as out of reach for many people. But, through technology like digital financial advice, that’s starting to change.
Research by New Zealand’s Financial Services Council in 2020 showed 75 per cent of people believe their overall wellbeing is linked to their financial wellbeing. That means there are a lot of emotions in play when you’re planning for your retirement. A fresh set of eyes and ears can really help bring clarity and perspective. You can kick off the new year with a chat to the Milford team over the phone or access our incredibly handy online planning and advice tools. Now anyone investing with Milford or switching their KiwiSaver to us from another provider can harness the power of financial advice.
KiwiSaver is only the start
KiwiSaver is a great place to start your investing journey. If you are considering saving and investing more, then an investment fund is worth a look. Investment funds are becoming more and more popular with Kiwi investors. They make becoming an investor really easy; a professionally managed investment portfolio means not having to do all the detailed work yourself.
As with a KiwiSaver fund, an investment fund will usually involve a mix of shares, bonds and cash across local and overseas markets, and will be managed by a professional fund manager. In some cases, the exact same fund you’re investing in for KiwiSaver, may also be offered by your KiwiSaver provider as an investment fund.
By placing some of your lump sum savings (or making regular contributions) into an investment fund, you can benefit from the fund’s diversification, the skill and track-record of the investment team and the power of compounding investment returns, just as with your KiwiSaver fund. But, unlike KiwiSaver, you can make withdrawals when you need to.
However, don’t forget that most investment funds have a minimum recommended investment time frame you should commit to – to give the best chance of achieving your goals.
Make 2023 your best financial year yet
Why do we make New Year’s resolutions? Because when we look at our lives, whatever stage we’re at, we all see things we want to, and can, improve on. Make 2023 a year of action. Follow some of the steps listed above and you’ll put yourself in a better position for the years ahead.