What is market volatility?
Market volatility is a term used to describe the ups and downs in the value of investment assets. The value of any asset – whether it’s shares, property or bonds – can fluctuate over the short-term, sometimes significantly.
The causes of market volatility are many and varied. Economic or geopolitical factors, like interest rate changes, inflation, trade disagreements, natural disasters and conflicts, can all impact financial markets and result in volatility.
In this article, you can read about:
- What is market volatility?
- Volatility and your investment
- Market cycles
- Taking control of your investment
Volatility and your investment
If you are a member of the Mercer KiwiSaver scheme, Mercer FlexiSaver or Mercer Super Trust, your account balance is typically invested in various asset classes and financial markets – and volatility is unavoidable. So don’t be alarmed when your balance drops from time to time.
Unless you’re nearing retirement or are needing to withdraw your money in the near future, your funds are generally invested for the long-term, and it’s the long-term results that matter. It’s normal to feel concerned when your account balance dips, but instead of worrying about short-term market volatility, focus on your retirement and investment goals and think in terms of years and decades.
Market cycles - bulls and bears
Markets move in cycles, from lows to highs and back again. A full market cycle can typically include both a “bull market” and a “bear market”, with peaks and troughs in between.
A bull market is an extended period of consistently rising prices. Investor confidence is high, and the economy is usually (but not always) growing.
A bear market is a period of falling prices when investor confidence is low and the economy is in a downturn phase, such as a recession.
Time in the market vs timing the market
Market cycles are unpredictable, and each stage generally only becomes clear in hindsight.
That’s why it’s so difficult, and risky – even for seasoned investors – to try and time the market by buying and selling assets at just the right time. KiwiSaver and Super members are likely to remain invested for decades, and “time in the market” has been shown to be a much safer strategy than “timing the market”. If you are a FlexiSaver member it is important to consider your investment goals and objectives, risk appetite and personal circumstances.
That’s because time often negates the effects of short-term market fluctuations – history shows market values tend to increase over longer periods, despite the ups and downs.
Spending time in the market carries the added benefit of compounding returns over many years. Perhaps the biggest advantage of taking the longer-term view, is that it helps investors resist rash decisions and instead rely on the market to deliver sustainable returns over the long-term.
Global and local investment expertise
Mercer’s global and local investment analysts, researchers, economists, asset class specialists and portfolio managers actively monitor markets to try identify the most important developments and potential opportunities.
Mercer New Zealand offers single-sector and diversified investment options, and our experts actively manage portfolios to capture opportunities when markets are rising and help cushion Mercer’s member account balances from the worst when markets are falling.
Stay on track with your investment strategy and achieve your investment goals
The Mercer KiwiSaver Retirement Income Simulator lets you estimate your retirement income and explore the impact of investment decisions, including making voluntary contributions, changing investment strategy, taking a career break or adjusting retirement age.
The tool also includes a "stress test" that simulates up to 10 randomly generated scenarios to reflect the possible impact of market volatility on your retirement savings.
If you are a member of the Mercer Super Trust, please log in to your account to access your personalised Retirement Income Simulator under “Tools”.
Check before you switch
Switching investment options in response to market volatility can have a significant impact on your account balance when you retire, so we recommend talking to our financial advice team, or an independent licensed financial adviser, before deciding.
Mercer New Zealand members have access to our dedicated advice team, at no additional cost. They can provide you with tailored financial advice over the phone regarding your Mercer KiwiSaver scheme, Mercer Super Trust or Mercer FlexiSaver account, including which of our investment options may be right for you.
This document has been prepared and published by Mercer (N.Z.) Limited (Mercer). The information contained in this article is intended for general guidance only and does not take account of the investment objectives, financial situation and/or particular needs of any person. Before making any investment decision, you should refer to the Product Disclosure Statement or take financial advice as to whether your intended action is appropriate in light of your particular investment needs, objectives and financial circumstances. Past performance is no guarantee or indicator of future performance. Copyright 2025 Mercer (N.Z.) Limited. All rights reserved.
