What will happen if there is a market downturn?

The value of your KiwiSaver portfolio will fall, though the key is to not worry about this and wait for the markets to recover (which they inevitably will).

Markets are cyclical in nature so that there will always be ups and downs in the value of your portfolio. 

As long as you understand that you are investing for the long term, the cyclical nature of financial markets should not worry you unduly. There will be periods when the value of your KiwiSaver balance will fall, potentially by a significant amount. 

Historically, market downturns have lasted 5-7 years (between the time when assets started falling to when they recovered in value). The value of assets has always recovered and continued to grow.

The worst thing that you can do in a market downturn is to change your investment strategy, e.g. to sell your shares (growth assets) and buy bonds or cash (income assets). By doing so, you are likely to crystallise a loss you may never recoup if markets do recover later, as they generally will. 

For more details check out our blog “Understanding Risk” here.