Retirement
Super retracts following global sell-off
As investors continue a widespread sell-off of global equities, median growth funds have fallen only gradually, latest research has found.
Super retracts following global sell-off
As investors continue a widespread sell-off of global equities, median growth funds have fallen only gradually, latest research has found.
According to Chant West, the median growth fund (61 to 80 per cent in growth assets) experienced losses of 3.1 per cent in the month of February.
In February, Australian shares slid 7.8 per cent, while international equities fell by 8.1 per cent in hedged terms, although Australia’s falling dollar limited the loss to 4.9 per cent.
Chant West senior investment research manager Mano Mohankumar believes that while the impact of COVID-19 will impact member’s superannuation balance, it will not be as big as people think.
“Growth funds, which is where most Australians have their superannuation invested, hold diversified portfolios that are spread across a wide range of growth and defensive stock sectors.”
“This diversification works to cushion the blow during periods of sharemarket weakness. So, while Australian and international shares are down at least 27 per cent since the end of January, the median growth fund has been limited to about 13 per cent,” Mr Mohankumar said.
The researcher highlighted that superannuation is a long-term asset, with members gaining strongly since the last financial impact.
“From the GFC low point in early 2009 to the end of January 2020, the median growth fund averaged a staggering 9.3 per cent per annum, well ahead of the typical long-term return objective of 5.5 to 6 per cent per annum,” Mr Mohankumar explained.
Finally, Mr Mohankumar reminded members not to panic as global markets experience instability.
“The key message to members is not to take panic measures they might regret later. It’s too early to tell what the full economic impact of the virus will be, and trying to time markets now is a very risky proposition.”
“The negative returns we’ve seen in recent weeks are unrealised losses, so you don’t actually lock them in unless you take your money out or switch to a lower risk option,” Mr Mohankumar concluded.
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