Latest news Fall in share prices no reason to panic

Article from Mercer, the scheme’s investment manager

Updated 9 May 2022

So far, 2022 has seen significant volatility in share markets, prompted initially by the prospect of interest rate rises in response to rising inflation rates. In late February, we were shocked and saddened along with the rest of the world as Russia launched a military attack on Ukraine. Russia has continued to devastate Ukraine, which has led to a combination of sanctions and western companies withdrawing their operations from Russia. As part of these sanctions and responses, market index providers, FTSE and MSCI, have removed Russia from their market indices.[1] You can read a full investment review of the three months to 31 March 2022 here.

PSS funds have very little exposure to Russian assets. However, wider market sentiment has changed more generally with investors focused on reducing risk and protecting their assets. This has provided significant headwinds for PSS funds. While performance rebounded in the month of March, most members will have experienced negative returns for the first three months of 2022.

We recognise this volatility may be unsettling and we encourage members to stay calm. Accumulating savings for retirement requires investing with a longer-term horizon. Checking your balance every day can potentially lead to making poor financial choices based on immediate fears. Moving funds or withdrawing money at a time when markets fall cements any losses. It would be like selling your house just because property values had fallen – you wouldn’t sell unless you needed to. You would miss the opportunity to benefit from the rebound as prices recover. For many people, not making a change at the moment is the best thing to do. Furthermore, continuing to save regularly and investing while fund values decline typically pays off over the longer term.

Think about when you need to access your money. If you’re saving for the long term, you have plenty of time to ride out the highs and lows associated with returns from growth investments. However, if you are thinking of withdrawing your money in the near future for retirement or a first home, you need to consider that your savings may be reduced if investment markets weaken further. As you approach a life milestone, you may wish to alter your investment options to better reflect your risk profile.

Things to remember in times of market volatility

Diversify: The Police Superannuation scheme offers five investment options. Four of these – Stable, Balanced, Growth and High Growth – are diversified funds. This means they invest in a variety of assets such as shares, property, bonds and cash, although in different proportions in order to create options of varying risk-return profiles. The other option is Cash Plus. Make sure you know what investment option you are in and the impact markets may have on returns. You can find out more about the five investment options here.

When you sign in to your account, the Retirement Income Calculator available to you in the tools sections has a ‘stress test’ feature that can help you see how different market scenarios could impact each investment option.

Seek advice: Financial advisers can help you make the right investment decisions.

The right financial adviser can save you time and help you achieve your retirement savings or first-home goals. If you are concerned about the markets or considering changing investment options, investing more money or perhaps withdrawing some of your savings for a first home or retirement, speak with a financial advice provider.

Stay calm – it’s about time, not timing: You can access online tools to help you work out what investment option you should be in and understand the impact markets may have on your investments. Take a moment to consider what sort of investor you are by taking our risk quiz.

[1]An index is a basket of securities that measures the performance of a particular market.
[2] Hedging is like an insurance policy used to protect returns from changes in foreign exchange rates. The trustee’s policy is to hedge fully the foreign currency exposure arising from all investments with the exception of investments in global shares which are 50% hedged.

This information has been prepared by Mercer (N.Z.) Limited (Mercer) for general information only. The information does not take into account your personal objectives, financial situation or needs. Before making any investment decision, you should take financial advice as to whether your intended action is appropriate in light of your particular investment needs, objectives and financial circumstances. Neither Mercer nor any related party accepts any responsibility for any inaccuracy. Past performance is no guarantee or indicator of future performance.