Booster Client Update - Market volatility, a friend to the long-term investor?
We mentioned a couple of updates ago that more ‘normal’ volatility has returned to markets so far in 2018. This can be unsettling to investors as they can start to worry about the value of their portfolios. However, volatility actually provides very valuable opportunities to the long-term investor. History tells us that markets always go up over the long-term, so when they have small dips, this is a bit like the market having a sale! Warren Buffett, one of the world’s most successful investors, once said “whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down”. One way of systematically taking advantage of these market ‘sale’ opportunities is through something called “dollar cost averaging”.
Let’s take a look at a quick example to illustrate this. The chart above shows a company’s share price over time. As you can see it fluctuates between years, but over the six years the price goes from $5 to $10. Each of the boxes shows the number of shares you can buy if you invest $1,000 each year. As you can see, in year 3 when the price is at its lowest, you can purchase the largest number of shares. At the end of the year 6 you finish with a value of $10,090 (1,009 shares @$10 per share). If you compare this to a scenario of no volatility, where the share price moves in a straight line from $5 in year 1 to $10 in year 6 and you invested the same $1,000 each year, the value you finish with is only $8,460 (846 shares @$10 per share). That’s 16% less than if there are dips in the share price along the way. Moral of the story – having a structured approach and regular contributions can help turn short term volatility to your long term advantage!
Market & Portfolio Update - April 2022
Global share markets continued their choppy start to 2022 during April.For New Zealand based investors, a fall in the NZ dollar played an important role in helping offset the volatility global share markets experienced. The NZ dollar fell against most major currencies supporting the returns of unhedged overseas assets (assets that are free to move with exchange rates). As a result, ‘unhedged’ overseas investments fell by only 1.8% for NZ based investors.
The KiwiSaver Gender Divide – Why are women saving less and what can be done to combat this?
Recent data shows that, on average, women have 20% less in their KiwiSavers than men. The gap being at its largest between men and women in their 40s and 50s. There are a few factors that come into play causing this divide and although it will take years to achieve equality, there are ways in which we can be proactive to help close the gap. As of August 2021, the gender pay gap is at 9.1% in New Zealand, a decrease of about 0.4% from 2020’s stats.