A challenging time for investors

Especially those in our more conservative strategies.

This year, if you’ve been invested in one of our strategies, it’s likely you’ll have experienced negative returns for the first time in a while. And, if you’re invested in one of our more conservative strategies, such as our Conservative or Conservative Balanced strategies, or our fixed interest-only strategies, then you’re probably also wondering why your investments have fallen at a time when these should typically hold up a bit better.

Here, we explain some of the challenges investors have faced.

Tough market conditions

Financial markets have had a particularly tough time this year. Investors have been worrying about high inflation and rising interest rates, and the prospect that a slowdown in global growth could tip the world’s economies into recession. Investors don’t like uncertainty, and this has resulted in some big falls in financial markets and is contributing to the ongoing volatility that we’re seeing.

While all of our strategies have been impacted, investors in our more conservative strategies have been particularly hard hit. It may be that you’re invested in one of these strategies because you have a low tolerance for risk, or a shorter investment timeframe. For example, you may not like the ups and downs that typically comes with investing in growth assets (such as shares), or you may be investing for a shorter-term goal.

It’s not just ANZ’s investment strategies that have been affected this year. Investors in similar strategies with other providers are likely to have seen their investments go down as well.

Bond markets have had it particularly bad

Our Conservative and Conservative Balanced strategies, and our fixed interest-only strategies, have been caught up in this volatility, and it’s likely that their returns are worse than you might have expected as a more conservative investor.

That’s because these strategies have a high weighting to fixed interest, or bond investments. In the past, bonds have offered more steady and less volatile investment returns. You could think of bonds as being the insurance policy of your diversified investment portfolio; typically, they have offered investors a ‘safe haven’ when everything else is falling.

However, this year, bonds have had a tough time because they are particularly sensitive to rising interest rates. Interest rates have been heading higher all around the world as authorities have lifted them in an effort to get on top of inflation – as countries try to get to grips with the cost of living crisis that is unfolding.

Given how quickly interest rates have risen this year, bonds have fallen in value. In fact, bond markets have had one of the worst years on record, with bond investments experiencing similar volatility to that of share markets.

At the same time, growth investments such as shares, which make up the remainder of our diversified investment strategies, have also faced into these headwinds, compounding the losses for investors.

Time to step back and get some perspective

No one likes seeing the value of their investments going backwards, but as hard as it is, market falls are part and parcel of investing. However, we would remind you of just how well investment markets have performed of late; returns were strong in 2021, and have been for most of the last 10 years.

Markets move in cycles and, this year, they have struggled with the idea of higher interest rates. But markets are also forward-looking, and bond markets have now priced-in much of the expected rise in interest rates. Because of this, the future return prospects for bond markets now look better than they have in years, and we are confident that bonds should start to work again as intended – offering a cushion for your broader investment portfolio in what looks likely to remain a volatile environment.

You still have time on your side

As with any investment, it pays to have a plan – whether you’re saving for a long-term or a short-term goal. And if you already have a plan, now is not the time to deviate away from it.

While it can be hard seeing your investments fall in value, investing is for the long term, and market falls can provide good opportunities for the team at ANZ Investments.

Want help?

We urge you to focus on your individual situation, including your tolerance for risk, investment time-frame and your investment goals, and avoid making short-term decisions.

Of course, if you’re concerned about your investments or your ability to achieve your investment goals, please reach out to your ANZ Private Banker in the first instance.

You can also visit our online resources at anz.co.nz/investing101, where you’ll find tips on how to deal with the ups and downs in markets, and some of the other ways we are looking out for your investments.

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Important information

This information is issued by ANZ Bank New Zealand Limited (ANZ). The information is current as at 29 September 2022, and is subject to change. This document is for information purposes only and is not to be construed as advice. Although all the information in this document is obtained in good faith from sources believed to be reliable, no representation of warranty, express or implied is made as to its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ does not accept any responsibility or liability for any direct or indirect loss or damage arising from your use of this information. Past performance is not indicative of future performance. The actual performance any given investor realises will depend on many things, is not guaranteed and may be negative as well as positive. Please talk to ANZ if you need financial advice. See ANZ’s financial advice provider disclosure at anz.co.nz/fapdisclosure.