“If the recent pullback has caused concern, we would typically view that as a question around the risk-tolerance being inappropriate for their current situation.
“You may be 22 years old and have a higher tolerance of risk, but if you’re buying a house in six months’ time, the best practice would say you shouldn’t be in a highly volatile growth fund.
“The long-term investors should see market fallbacks as an opportunity rather than something to fear.
“Periods like this can present staged buying opportunities via regular contributions and disciplined rebalancing, rather than trying to pick the bottom.”
Sullivan said the latest leg down in technology stocks looked like a mix of earnings and forward-guidance disappointment in key chip names, along with a broader “AI [artificial intelligence] disruption” narrative weighing on parts of software and high-multiple growth stocks.
Investors were spooked by news on Tuesday (UST) that AI start-up Anthropic – which created the Claude chatbot – had unveiled a tool that could be used by firms to carry out legal work.
The announcement hit firms in the software, financial services and asset management industries.
“The pace of AI capability improvement reinforces investor debate about which parts of software value chains face margin pressure versus which companies gain productivity and pricing power,” Sullivan said.
“This can create short-term volatility even when the long-term theme remains constructive.”
Sullivan said KiwiSaver as a system is heavily invested offshore, including overseas equities.
“So, members in growth and aggressive options will feel global equity swings more than conservative options,” he said.
“People just need to think long-term and to view market volatility as a feature and not a bug. These sorts of things happen all the time.”
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.