What if stock markets tank in 2025?

At the back end of 2024 I started to get worried about stock market returns.

I was receiving too many messages from people having great performance in their KiwiSaver and their investments.

Don’t get me wrong, I loved to see it. I was even checking mine.

A 16% gain for my KiwiSaver in 2024. You beauty.

But when these messages kept coming, I got worried.

Worried about what happens when it suddenly turns.

Because it can.

The past 2 years have been exceptional for many overseas investors (the majority of long term KiwiSaver funds).

People legit know what the S&P is these days and don’t think it’s salt and pepper. It’s crazy how far NZ has come in terms of investing with the growth of KiwiSaver, share platforms and financial literacy access.

We bloody love it!

But whilst the markets have delivered impressive returns, many of us have grown a little too comfortable with these sweet sweet increases up and to the right.

As seasoned investors know, markets don’t move in a straight line.

When I speak to advisors they are very cautious about 2025. Well, probably more cautious about the over optimism being picked up by the everyday investor.

This includes us KiwiSaver users too.

We all get excited logging in and seeing what is happening with our stocks and balances when really we aren’t touching them anytime soon.

2025 could bring new challenges that none of us can foresee. That means that there is ALWAYS the possibility of a market downturn or lower returns.

2026 will be no different.

HOWEVER, this doesn’t mean you should panic, stop investing, freak out or selll.

Instead, it’s an opportunity to assess your investment strategy and ensure you’re prepared for the future.

This means in the mind too.

? How will you respond when the markets aren’t returning what they once were?

?How will you respond in a down year?

?How will you react when someone tells you ‘KiwiSaver stole your money’ in a down year?

?How will you react when your Uncle tells you ‘The govt took your money’ in a down year?

?We must educate ourselves to the realities of investing.

?We need to understand investing more than just 'yeah I contribute to KiwiSaver each week'.

Please for the love of god do not mistake this Money Mail for me thinking that markets will slide or crash.

It's more a reminder that we need to be preapred for volatility and swings.

To finish, here are a few ways in which you can prepare:

1.Stay focused on the long term

KiwiSaver and other investments are designed to grow over time. Short-term dips are a normal part of the market cycle, but history shows that markets tend to recover and grow in the long run. Keep your goals in mind IF it gets rocky out there.

2. Diversify your investments

Ensure your portfolio is balanced across different asset classes. Diversification can help reduce the impact of market volatility. Most fund providers do this piece for you. ETF's look to achieve this too.

3. Keep contributing

It might feel like the wrong thing to do, but continuing regular contributions during a downturn can actually help you buy assets at lower prices, setting you up for greater gains when markets recover. (2022 to 2024 anyone?).

4. Review your risk profile

Make sure your investment choices align with your risk tolerance. If you’re unsure, now is a good time to check in with your KiwiSaver provider or financial adviser. Generate have a team of KiwiSaver advisors nationwide for you to discuss this with.

It’s important for me to point out that the above are just basics and this is not financial advice.

I want to write alongside you for some time and I know we’ll go through an investing dip at some stage.

(Hell I have been through NZ shares in 2022 to 2024 but even the NZX 50 is slowly recovering).

I’ll be here for the ups and downs.

I’ll be investing through them too.

Remember, that no one knows what is around the corner. That is why Warren Buffett once said, “Successful investing takes time, discipline and patience”.

The key is not to panic. And I hope people don’t when we do have a serious pullback.

Check out this resource from Generate KiwiSaver scheme who wrote more about this in 2022: https://www.generatewealth.co.nz/kiwisaver-downturn

And when the world got rocky in 2023: https://www.generatewealth.co.nz/what-to-do-when-the-financial-markets-are-down

Be bolder,

Luke

P.s. You are one of?12,400+?recipients.?The KTC podcast has ticked over?1,600,000?audio downloads.?Feel free to share a lesson with?someone to help this reach more people. ___________________________________________________________________________ Did you know:?the S&P500 has had years where it has dropped by 30% or more. However, it has continued to to recover from any of those noticeable falls.

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