Share Market Shocker
5 Nov, 2023
Having invested in my KiwiSaver since 2007 and ETFs since at least 2015, I no longer take much notice of what the local and international share markets are doing.
However, on the first of every new month, I have to check in on the value of each investment so I can update our net worth spreadsheet, a document on my laptop that I’ve been adding to for years. I note down the value of each asset and how much money we invested into each during that month. In total, year to date to the 1st of November, we have added ~ $21,000.
We invest regularly:
KiwiSaver - Weekly employer and employee contributions, and also a monthly voluntary contribution to make sure we get over the $1,042 threshold each year (remember, we work part-time).
ETF Funds (US 500 + NZ Top 50) - We make one investment into each of our two funds on the same day each month. This is where the bulk of our invested pūtea goes.
In the first seven months of 2023, the combined balance of our investments increased monthly, helped by two factors: the share markets had risen, and we have invested a portion of every paycheque we make. We started 2023 with $403,000. It peaked at $444,000 at the end of July and now, at the end of October, has dropped back to $419,000.
The combined balance of our investments peaked at $444,000 in July and at the end of October is back to $419,000.
Worth noting was that back in May 2023, we cashed out/sold $12,000 worth of investments. Before selling, the balance was $422,000, and the following month, despite selling off $12,000, the balance was $421,000! It was a solid month for share markets to make up that difference.
But, it was not to last.
As the year has rolled on, between August and October, and despite continuing to invest throughout that time, the total value of our investments dropped $25,000.
I’ve come a long way because I find this decrease interesting, not terrifying.
Am I concerned about this recent drop?
Not one bit. Give it time, and it will come right.
There are so many reasons I feel indifferent about this drop in value, and they are worth sharing because I don’t want you to be fearful if you have listened to some news that focuses on the dip in the value of your KiwiSaver investments or you have simply checked your balance and noticed a similar drop.
Over the years, our net worth has grown.
In January, our investment value was $403,000. On 1st November, they were $419,000, a $16,000 increase. When I compare our 1 November 2023 balance with one year ago, it has risen $29,000. Compared with two years ago? A $65,000 increase. Three years? $131,000 increase.
We focus on years, not months.
We kept investing each month.
Take a look at the New Zealand and US share markets for 2023. They start dropping in August; hence, our balances are decreasing. Everything we own today is now worth less:
Market Summary of the S&P/NZX 50 Index Year To Date
Market Summary of the S&P 500 Year To Date
These graphs only represent ten short months of our investing lifecycle. We need to zoom out a bit to get a clearer picture and take a broader view of what the share market does over time. It goes up:
Market Summary of the S&P/NZX 50 Index Max
Market Summary of the S&P 500 Max
Taking this more comprehensive view is why I’m not concerned about my balance dropping by $25,000. It’s not permanent. If I got frightened and sold, I would lock in those losses and make it permanent, but that won’t be happening.
Might it drop further in the coming months? Maybe. But in the long term? No.
Working very much in my favour is that because we invest so regularly, the price of everything we buy has dropped, so we are buying everything we usually buy more cheaply. Shares are on sale, and I’m stocking up as best I can, cashflow permitting.
Investing in an ETF that buys, give or take, ‘the whole market’ also solidifies my view that this is a smoother way to grow wealth than picking a handful of single company stocks to invest in. More than ever, that feels like playing roulette to me. If I’d staked our fortune on a few companies, I would be fearful, hence selling off our last individual company a few years back.
Let’s not discuss politics.
You might notice you don’t see me write much about politics or global events. These are the events that make the share market wobble all over the place. While I do have my thoughts on all that goes on, I reserve these for conversations between friends because the government of the day and what goes on nationally and internationally have little bearing on how Jonny and I invest. If I were to react to each event, they are sadly so very frequent that I would never have the guts to push the “buy” button on my computer. It is far simpler to leave the endless kōrero of why the share market does what it does to those whose job it is to do so, but even then, I can’t help but think it is a giant guessing game. There are so many variables at play in the share market that I believe it is impossible to predict what a change in one variable will do to all the rest. What I have become comfortable with is the knowledge that despite all that goes on in the world, the share market still resolutely rises over time and has endured so much throughout its existence. I can’t see that changing, so I keep investing. And the longer I invest, the less notice I take of what makes the news.
Drops like this also tell me how I might invest when the time comes for us to live off our invested money fully. Our strategy will be to have a few years of cash in the bank (some of it in term deposits) to pay ourselves from each week. We will need a reliable income, and the share market dropping right when we need to cash some out for the month is unreliable. But withdrawing one chunk once every year or two to top up spending accounts is much more manageable.
The only factor that makes a difference to the value of our investments is the person I see in the mirror: Me.
Consistently investing as much as I can each month moves the needle on our net worth over time. If I were to stop investing just because the share market dropped, then I would only ever be buying shares at full price. I’ve got to invest when the price goes down, too. And because we never know which way the markets will go week by week, it's just easier to invest without trying to predict their movements. When the share markets drop as they currently have, our money buys more shares in my funds. And when we fast forward to better times, those shares bought cheaply will have a much more significant capital gain. That’s what grows our wealth over time.
I stay optimistic that all of the thousands of companies I invest in wake up each morning and go to work with the sole intention of making their businesses better. However, the beauty of the way I invest, which is solely in KiwiSaver and ETF funds that buy a whole market, is that if, despite their best efforts, their business hits a wall, they will be removed from the fund and replaced with the next top performer, all without me having to lift a finger. Meaning we always hold the top performers.
Do I feel confident that the future is bright? Yes. Yes, I do.
You can be sure that I’ll continue tracking the value of our investments, and I’ll let you know in 12 months how we go, OK?
