I’ve had a couple of calls from clients who I’ve recommended a portfolio to six months ago, and who’ve been drip-feeding into that fund – and now this has happened.

They’ve asked exactly that question: should they keep on doing it?

And the answer’s absolutely yes, because it’s at times like this, when you do have volatility, that you’re buying cheap shares. It makes no sense, having purchased those shares when markets were expensive, to stop buying them when they’re cheap.

When I’m working with a client, we’ve already put our emergency fund aside – I always do that with clients – but if somebody’s lost their job or they don’t have much in emergency funds, they probably have to build that up before investing. So, safety first.

Where’s the bottom?

I do not believe the market volatility is over.

If you look at the chart above showing share market volatility in the Global Financial Crisis (GFC), I think we’re seeing that bounce at number one, maybe just like the GFC.

If you look at the number four, anyone buying in the dip at the bottom there must have thought they’d done really well, but they hadn’t.

For a few weeks, it’s fantastic when there’s a bounce. But then came a very long slide down to five, which actually is the bottom.

I think that’s the point, markets have storms. It’s virtually impossible pick the absolute bottom, so you need to make a series of purchases, over a three-month period, or a six-month period, and then be happy with the fact that you’ve bought value.

You may not have got the best value, but you’ve got value.

How much risk?

If you take, say, a 65-year-old, you’d often say that you might want to lower risk at that age. That’s a fairly easy message to sell now, but it wasn’t easy to sell when we go back to January. But they’re going to be invested for probably another 25 or 30 years.

A lot of people, when they get to retirement age, won’t necessarily cash up their KiwiSaver account. Some people do a partial withdrawal. Some people do none at all, and just use it as their investment account in retirement.

So, many of these decisions are a matter of judgement. You’ve got to weigh up a whole bunch of factors:

Time is important, but it’s not the only factor.

Consider your capacity to withstand a big economic shock. Take somebody who’s a doctor or a lawyer. Chances are they can continue to earn income in most situations, so they’ve got a good capacity to withstand shocks.

People who have income replacement insurance as well, are the other ones who are likely to be fine.

And the other factor is the psychological one. I’ve seen a lot of people in the past few months who’ve been very worried about their portfolio, and they’ve watched their KiwiSaver balance drop, and that’s really worried them. They thought it was like a savings account, but it’s not – it’s volatile. I’d be setting up those people in a portfolio that’s a bit less risky.

If you’re a growth investor and you’re in your late 50s, or early 60s, I’d say you should have been moving to becoming a balanced investor. Maybe later on at 70, go into a conservative fund, depending on your situation.

A few people I would have at retirement still in growth funds, because they’ve been through crashes before, they’re comfortable with that. They’re still working as a professional, and they plan on doing that for as long as they possibly can, so they might be still earning money from work for another decade or more.

For example, my father was still working as a doctor in his early 80s. If I can get away with it, I plan never to retire.

It’s horses for courses. You can be general with advice, but you’ve got to be careful with that, because there are exceptions to every rule.

Should you switch funds?

This is the first time that people in KiwiSaver have been tested by a major crash.

KiwiSaver started in 2007, but nobody had much money in their KiwiSaver account back then, so they didn’t care.

Now our balances are NZ$20,000 or more. Some people have quite high balances, and this is their first experience ever of having an investment portfolio in a big crash.

The next time we go through this, I think there will be far fewer people switching out – and I hope fewer people panicking – because they will have set it up correctly at the beginning.

I encourage people to use Sorted.org.nz’s ‘Investor Kickstarter’ tool. Just answer a few questions and it’ll tell you the kind of portfolio that could suit you.

Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser and a Disclosure Statements is available on request and free of charge at www.martinhawes.com. Martin is a Director of Lifetime Income, an Annuity provider. This article is general in nature and not personalised advice.