Volatile markets and your Superannuation

September 9, 2019

You might have noticed a fall in your super balance in recent weeks and are wondering what the cause of this is.

Share markets around the world have been volatile in recent weeks, so if your super is invested in the Australian and/or international share markets, it’s likely you would have been affected by this.

How much of your super is invested in shares is also important. For example, if you’re invested in a high growth strategy, or are in a life-stage fund and are not looking to retire any time soon, it’s likely you’ll have more of your super invested in shares.

If you’re invested in a life-stage fund and are closer to retiring, or may have selected defensive strategies, your exposure to the share market and any risks associated with it may be lower.


What this means for you

The best thing you can do in volatile markets is stay calm.

Super is a long-term investment, so while investment markets can be unpredictable over the shorter term, over the longer term they typically recover.

If you’re approaching, or are in, retirement it’s still important to stay focused on your long-term investment strategy and consider all your options before making any significant changes.

You should consider keeping the following things in mind when looking at your super and what’s happening in global markets:


1. Stay calm

Over time, the value of your super investment will go up and down, depending on market conditions. Reacting to short term market conditions may mean you’re missing out on subsequent market improvements.


2. Di­ver­si­fi­ca­tion

Most members in super funds are invested in a variety of asset classes, not just the share market. Different asset classes perform differently over time which helps to even out the highs and lows of market volatility in a particular asset class.


3. Long term investing

Super is a long term investment so many investment objectives focus on a 10 year period. It is expected that there will be periods of volatility but over the longer term markets typically recover from short term movements.


4. Stick to your plan

It makes sense to understand how much risk you’re comfortable with taking when it comes to how your super is invested and build this into your financial plan. You may want to consider regularly reviewing your financial plan to make sure it still reflects your current needs. For instance, if you’re moving towards retirement and have your super invested in a high growth investment strategy, your level of risk may be too high.


5. Seek advice

If you need assistance with determining the level of risk you’re comfortable with taking on, or to determine if your financial plan is still meeting your needs, seek the advice of a financial planner. With a well formulated plan you are better placed to withstand periods of volatility.