Super Fund not immune to global uncertainty

Stock market concept

The New Zealand Super Fund has not been immune to the sell-off in world markets this year.

It has just released its January figures.

The fund's total assets fell by just over $1 billion in value to $28.33 billion - a fall of 3.57 percent for the month.

But the fund did slightly better than a "reference portfolio" that it is judged against, which fell 4.06 percent.

The Super Fund's managers said last month that they had been using the fall in prices to buy some stocks.

They say, "Because of its weighting-to-growth assets, the fund can experience large short-term movements. As a long-term investor we have a greater-than-average ability to withstand this volatility."

The Super Fund has risen 1.28 percent over the past twelve months. That compares to a fall of 1.35 percent for the reference portfolio.

The fund has averaged 9.21 percent per year in returns since it was launched in 2003.

The managers say the "Shifts in value from month to month must be seen in the context of the fund's long-term purpose and performance."

It was created to help fund New Zealand's future superannuation costs. It will not start paying out any of its money until 2029 and will continue to invest in global markets for years after that.

So is there a lesson for Kiwisaver investors?

Yes, you should try to focus on the long term. Try not to be distracted or spooked by short-term events.

Last September, the markets were selling off as well. Back then the Guardians of the Super Fund offered some tips for investors. The advice is just as timely now.

1. Get your asset mix right. If you have a long time until retirement you should mostly be invested in growth assets, such as shares. The Super Fund won't start paying out for another 15 years and it has 80 percent of its investments in growth assets.

2. Stay focused on your long-term goals. Don't overreact to market ups and downs.

3. The fund tries to choose low-cost managers. That is because fees are a massive drag on long-term returns.

4. Don't chop and change funds to chase last year's top performer. Last year's performer can be this year's worst.

5. Think about your long-term investments like a house or a farm. If you do not need to sell it, do not check the value every day.

6. Start saving early to benefit from compounding interest over time.