*This article was written in the middle of the global Covid-19 pandemic, but regardless of what causes investment markets to drop, the messages remain relevant to Britannia Financial investors. Despite difficult circumstances, we encourage our investors to do two things. Firstly, remain focused on your long-term goals, and secondly, to reach out and talk to us if you have any questions at all.

While we don’t have a crystal ball and therefore can’t say exactly how the markets will react to Covid-19, to parody an old WWII poster, we think that you should Keep Calm and Stay Invested, and talk to your financial adviser before making any financial decisions. Too many investors react emotionally, especially when it comes to their retirement investments. This is a scary time, we get that. Your Britannia Financial Adviser can provide calm, clear and unemotionally impacted advice aimed at providing you with better choices based on your unique needs, as well as a greater return on your investment.

This is not the first time the world has faced a global pandemic, so the first thing we need to look at is how markets behave during times like these. Our most recent example, and the most profound, is the Spanish Flu Pandemic of 1919. As one of the deadliest pandemics in recent history, it gives us a good baseline from which to judge the current pandemic, and against which we can make decisions. Approximately 50 million people died in 1919 because of the flu. That is 1.7% of the world’s population. Fortunately, Covid-19 is not as voracious as the Spanish Flu.

What’s encouraging from an investment side though is the impact the Spanish Flu had on the stock market. In short, it was minimal. During 1918 and 1919, the Dow Jones Industrial Average (the US stock market) was relatively unaffected. In 1918, World War I was devouring Europe and had a larger impact on the stock market than the flu. When the third and final wave of the Spanish flu subsided in February 1919, the market began an increase of 50%! This lasted 9 months, until November of 1919. The market hardly dipped during the pandemic and then rose dramatically afterwards.

Why do markets dip?

There are many reasons why markets dip although it usually starts with a global event (in this case a pandemic) which causes investors to panic and start selling off their assets. Media reports, whether accurate or not, can add fuel to the fire and worsen the crisis.

The best advice is to stay calm; don’t make any rash decisions and certainly don’t make any decisions without talking to your Britannia Financial Adviser first.

Is an up-turn in the market a sure thing?

It’s been proven time and time again that markets recover. If not in the short-term, then definitely in the long-term. Both the Spanish Flu Pandemic and the 2007-2008 Global Financial Crisis prove this. Not only did the markets recover but, in both instances, they went on to perform extremely well.
There will always be unknowns, that’s life. However, based on recent history, we can be confident enough to reiterate the fact that markets will recover. That’s why I want to emphasise the need to stay calm and talk to your Britannia Financial Adviser.

But perhaps I should switch to a more conservative fund?

Unless you have already switched funds or withdrawn your money, you haven’t actually locked in any loss. And that’s good. Let’s work together at keeping it that way.

Is it an appropriate time to switch to a more aggressive fund?

Investors, especially during a crisis or a market downturn, see an opportunity to buy assets while they are cheap. And there is some truth to that theory. But no matter what the markets are doing, being cautious is imperative! One of our main philosophies underpinning how we invest at Britannia is that no-one can time the market (know when it will go up or down) with any certainty. Here are two reasons why moving from a conservative to a more aggressive fund involves some degree of risk:

  • If you do this at a time when the market has yet to reach its bottom, you will make an initial loss.
  • Although we expect markets to bounce back in time you have no certainty of when the fund you are investing in will recover.

Investors with a longer investment timeframe might wish to consider a strategy like this but make sure you talk to your Britannia Financial Adviser first.

I have a Term Deposit Bond that is about to mature – what should I do?

Do you:

  • Have a lump-sum of money that you don’t know what to do with, for example, a Term Deposit Bond that’s about to mature?
  • Have you recently turned 65 and have received a KiwiSaver lump-sum?

If so, Britannia Financial offers a range of investment options, but we have one in particular that might be worth considering in this case. It’s called the Lifetime Income Fund.

  • It has a number of features that will give you more certainty around investment returns.
  • It will also provide you with a regular income for the rest of your life.

When you invest in the Lifetime Income Fund, your regular income is insured. This means that no matter what happens to interest rates or the financial markets, your regular income will never decrease in value. If you’re looking for certainty around your income in retirement this may be a great option for you to consider.

2 great tools for you to use

  • Our Website Case Studies: If you want to see how this works in more detail visit our website for in-depth Lifetime Income Fund, retirement income case studies.
  • Our Handy Calculator: If you want to estimate what your retirement income might be if you were to invest in the Lifetime Income Fund, use the Lifetime Income calculator we provide.

The three most important things to remember

Focus on your long-term goals.

  • Saving for your retirement is a long-term investment. While it can be distressing to see your portfolio deteriorate due to ongoing volatility in the share markets, we encourage you to take a long-term view.

If you move your money now, during a downturn in the market, two things might happen:

  • You might miss out when the inevitable market upswing occurs.
  • It may take you much longer to recover your money.

Switching funds may be the right thing to do for a few investors but this probably would apply to them whether we were passing through the COVID-19 era or not.

  • If an investor is close to, or in retirement, and needs extra certainty, then a more conservative fund might be appropriate.

While that sounds like a simple answer, it’s important to bear in mind there are other factors which need to be taken into consideration before making any decisions. Factors you may not have realised. Talking to your Britannia Financial Adviser is a very real necessity.

Call Britannia

If you have any concerns about your investments, whether you are a Britannia Financial client or not, give us a call on 0800 28 28 28, or email us at investments@britanniafinancial.co.nz and let us know how we can help. Whatever you do, talk to us, or your own financial investment adviser, before you make any decisions.

The information contained in this article is of a general nature only and does not take into account individual circumstances. It is not intended to provide comprehensive or specific financial advice. Before making an investment decision you should talk to your Authorised Financial Adviser.

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Disclosure Statements for Britannia's Financial Advisers are available on request and free of charge. Product Disclosure Statements for the Britannia Retirement Scheme and the Integral Master Trust are available from the schemes’ issuer, Britannia Financial Services Limited, phone 0800 500 811. Britannia Financial Services Limited is a Registered Financial Service Provider.

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