"Global events, including COVID-19, can affect markets.
"This can cause volatility in KiwiSaver members' accounts, which simply means in the short-term, the balance goes up and down.
"A few Kiwis panicked and moved funds in March 2020. This only resulted in them crystallizing their losses - please don't do that."
Clive Fernandes, director, National Capital.
Money. It's the driving factor behind many life choices, but is it the be-all and end-all?
'Me and My Money' is a regular feature that investigates Kiwi attitudes towards money and what drives the choices they make.
Clive Fernandes is the director of National Capital, a company that gives KiwiSaver advice.
While Auckland remains in alert level 4 lockdown until at least September 13 (the rest of New Zealand in alert level 3, Northland from Thursday night), Fernandes reminds KiwiSaver members not to panic-switch.
The alert level changes are affecting many Kiwis' incomes, but others are earning the same and spending a lot less. Other than saving for a rainy day, a post-lockdown splurge or future travel, Fernandes suggests they could think of their 'future selves' and put a little extra into KiwiSaver.
Once an impatient investor, Fernandes says his biggest financial mistake was looking at how to invest a specific dollar amount, rather than his long-term goals.
1. How has the level 4 lockdown affected KiwiSaver fund performance?
KiwiSaver is a type of managed fund. Most KiwiSaver funds are diversified funds, meaning investments are spread over hundreds of companies world-wide.
While the August level 4 lockdown may affect local companies negatively, that's balanced by KiwiSaver investments in overseas companies.
Because of this diversification, we haven't seen a significant change in KiwiSaver fund performance/markets specifically due to the lockdown.
2. What is an important thing for KiwiSaver members to bear in mind during COVID-19?
Global events, including COVID-19, can affect markets.
This can cause volatility in KiwiSaver members' accounts, which simply means in the short-term, the balance goes up and down.
The best thing to do here is nothing. Those in the right fund for their situation should be able to ride out the volatility and end up with more money in their KiwiSaver account than when they started.
A few Kiwis panicked and moved funds in March 2020. This only resulted in them crystallising their losses - please don't do that!
3. Are you a saver or a spender?
I used to be a saver, now I'm a spender.
Typically, younger people spend more and start saving when they 'mature'. For me, it was different.
I spent the first few years of my working life saving and investing a lot of the money I earned. It got me to a place where I can now spend without having to worry too much about the future.
4. What's been your biggest financial lesson, success or failure?
In terms of dollars, my biggest financial failures are due to impatience around investing.
Imagine you have an amount of money to invest, say it's $1000. I was looking for a place to invest that exact amount of money. I focused too much on the dollar amount: what I should've done is focus on where to invest it.
I learned that being patient and saving towards the amount a good investment needs is more beneficial in the long-run.
5. What's the one thing KiwiSaver members wanting to maximise their savings should know?
I think it's a mistake to focus on just one thing.
For example, 'Which KiwiSaver fund has the lowest fee?', or 'Which KiwiSaver fund got the highest returns in the past?'.
Getting the most from KiwiSaver requires a bit more research. For example, the asset allocation of the fund (e.g. what percentage of the fund is invested in cash, fixed interest, shares and property) and how diversified it is (e.g. the types of investments).
Other questions people should be asking is who is managing the fund, and most importantly, what their policies and processes are. These determine how they invest your money.
I suggest reading the KiwiSaver provider's 'SIPO' - Statement of Investment Policy and Objectives. This is usually found in the documents section of their website.
Other than our homes, KiwiSaver is one of the largest assets most of us will have at retirement. Kiwis love to DIY - but with KiwiSaver, it's wise to check personal decisions with someone qualified to give advice.
6. Give an example of a recent purchase that you consider was great value for money?
An energy-efficient car.
It cost a little more than a non-energy efficient car of the same standard. But I consider that purchase an 'investment': I know it will pay for itself in the long-term.
When it comes to expending energy, I could almost describe the car as 'frugal'.
7. Does having more money increase happiness?
Yes and no.
A Princeton University study showed that to a certain level, we need money to be happy.
For those who don't have a warm house and food, it’s hard (but not impossible) to be happy. But once those basic needs are met, more money doesn't equal more happiness.
More money can lead to 'lifestyle creep', which is when we start getting 'used' to things we once considered a luxury. We can get caught up in the cycle of upgrading, making us less and less satisfied.
For me, money is a tool to buy more time with.
8. The best money advice someone's ever given you?
To invest in myself.
We may count our house, investments and KiwiSaver as assets. But for most of us, our earning potential is our single largest asset.
If we assume a 30-year-old is earning $60,000 per year - even if they never receive a pay rise - that's $2.1 million dollars by the time they retire at 65.
Investing in yourself, be that upskilling for work, or hobbies outside of work, adds to overall well-being and ultimately increases earning potential.
That's because you're constantly expanding the bandwidth of what you can do.
The views expressed in this article are not personal financial advice.