The benefits of a long-term approach to investing

Markets are always changing. Over the short term, investment markets can fluctuate in response to world events, economic trends, changing investor sentiment and a range of other factors. 

Sometimes, those fluctuations can be dramatic and unpredictable – for example the huge market swings at the start of the COVID-19 pandemic due to uncertainty about how the pandemic would play out. The 2007/08 Global Financial Crisis is another example. 

Events like these are impossible to predict. But history shows that there are short-term blips – and over the long term, generally markets rise. 

The graph below shows the return on a $10,000 investment across five OneAnswer KiwiSaver Scheme funds since its inception in 2007. It also shows some of the major events in New Zealand and around the world during that period. 

*Graph shows the amount without Government, employer or employee contributions. Returns are after fees before tax.

Despite significant short-term blips following events like the Global Financial Crisis and the COVID-19 pandemic, investing for the long term allows you to balance out short-term ups and downs – and benefit from when the market rebounds. 

As humans, we don’t always act logically, and investors are no different. Sometimes they are driven by emotions rather than facts. For example, investors following the crowd into complex investments they didn’t really understand was one of the main causes of the Global Financial Crisis.

That tendency towards ‘herd’ behaviour often causes investors to over-react to short-term events, by selling investments when the price drops (because lots of other people are), and missing out when the price rebounds. It can also lead to the reverse – buying investments when they’re popular and the price is high, when most of the gains have already been made.

ANZ’s long-term approach is underpinned by a rigorous, highly disciplined process which helps avoid these pitfalls. Our long-term horizon means we can take a more balanced view of the constant ‘noise’ in markets, and stay focused on long-term trends.

Any investment comes with risk – some bigger than others. While you can’t avoid risk, what really matters is how you manage it.

Our goal is to deliver a strong performance, over time. One stellar year means nothing if those gains are lost the next year. We carefully assess the balance of risk and returns, and the long-term potential, when considering any investment. That’s why our focussed long-term investment approach has delivered strong returns over the long run.