It’s unwise to keep moving investments around in response to market surges or slumps because by the time you act they'll probably have moved again, says Mary Holm.
Trying to ‘time’ the share or property market by taking action after you see a surge or slump doesn’t work as it's quite likely the market's next move will be in the opposite direction, she says.
Research shows people who try to cash in on market moves do much worse than those who get their investments right in the first place and then just sit on them – regardless of how the markets are looking.
One recent study found $10,000 invested in a US share market index fund in 2001 would result in a return of around $29,000 in 2016 – if the money was left in place that whole time.
If the money was moved in and out over that period – and as a result, the investor missed the 10 best trading days – the final return would be almost halved to $15,000.
“Share markets turn around really suddenly … and people just can’t see the [good or bad] days coming."
That doesn’t mean you should never change your investments, in KiwiSaver or otherwise, Holm says.
Base those decisions on what’s happening in your life, not the markets.
When you’re getting nearer to spending investment money or using retirement savings, it’s a good idea to move from a higher to a lower risk investment, she says.
The other general principle is to invest according to how comfortable you are with risk.
Tools like the KiwiSaver fund finder on the Sorted website offer questions designed to help people assess their own risk tolerance.
Any time you decide to change investments, it’s usually better to do so gradually, Holm says.