Is it still safe to ride the stock market?


More downs than ups mean investors face a wild ride for the foreseeable future. So how long should you hold on?

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My Sharesies account hasn’t been looking too healthy lately. I’ve been investing with the local stock market platform for the past couple of years, along with both of my kids, who have separate accounts. We each get $5 a week to play with. I mostly invest in climate-friendly funds, while my daughter puts all her money into Disney, and my son switches between Ferrari and Tesla. Invest in what you know – isn’t that the saying?

Lately, the returns I’m used to getting on the very small amounts we’ve invested have diminished. Last week, they disappeared, and for the first time, my profits became losses. That’s because riding the stock market has become an extremely volatile rollercoaster. You might have heard the phrase “bear market” being used. Bitcoin and NFTs have crashed. If you keep a close eye on your KiwiSaver account, you’ve probably seen this playing out across your balance sheet. Try not to look, says one expert.

Here’s a graph showing just one terrifying recent week on the US500…

Source: Trading Economics

I wouldn’t want to ride any rollercoaster that looks like that. But the reasons for all those dips and dives are obvious. The war in Ukraine is playing its part. There are supply chain issues. Business costs are rising, and so’s the cost of living, including some very expensive blocks of cheese showing up on supermarket shelves. Then there are interest rates, which keep going up. Shit is bleak out there.

The stock market can, and often does, reflect what’s going on in the world. As a reasonably new investor, that can be scary. Should I cut my losses and put all my money under a mattress? Erm, no. To help calm my nerves, I called Gus Watson, Sharesies’ head of new investment and funds. He told me to chill. The company gets questions like this every day, and they do as much as they can to educate their investors, which now top 570,000 across the country. “Know your goals,” he told me, calmly and patiently. “Know why you’re investing, and be in it for the long term.”

The long term. That’s the key. Markets always dip and dive. Anyone who’s been investing for a while knows this. “If you need to get your money out sooner than a 10 or 20 year timeline, adjust your investment strategy to some of those less risky  investments,” says Watson. No one can predict the future, and Watson didn’t even bother trying when I asked him how long these dips might last. In fact, he kind of chuckled. “I wish I could tell you that,” he said.

But perhaps another graph will help ease your own nerves. Here’s the US500 over the past 50 years. Note the two big dips in 2008, and again in 2020. Hmm. Wonder why.

stock market
Source: Trading Economics

I asked Watson how Sharesies investors had responded to the recent falls. I thought many might be bailing, but his answer surprised me: “We’re not seeing any cooling coming through,” he said. People are staying put, and riding it out. They have diversified portfolios, many are like me and invest small amounts often, and they understand that rises and falls are just part of riding this particular rollercoaster.

Plus, they’re investing in things they believe in. That means not everyone is in it just for financial gains. They want to support companies and funds that are trying to do good. “People are investing with their values, and their ethics, not just for financial return, but a broader investment strategy,” says Watson. “Some of our funds have a strict ethical mandate to them.” It’s true: I’m offsetting my son’s Ferrari investments by putting my money into global water funds.

Besides, a falling market can often be a good chance to pick up some bargains. “When there’s volatility, there can be a lot of opportunity as well,” Watson said. Perhaps we’re becoming an investment-savvy nation. Which is a good thing. Because, as Watson also told me: “There’s no sign that the volatility’s going to slow down in the short term.”

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