Retirement
Superannuation to withstand market volatility
Superannuation funds are well placed to ride out the current global instability despite mass falls in equity markets, according to an industry body.
Superannuation to withstand market volatility
Superannuation funds are well placed to ride out the current global instability despite mass falls in equity markets, according to an industry body.
With the United States S&P 500 having its biggest one-day fall since 1987 today and Australia’s ASX 200 officially hitting bear markets, some super members are worried as their balances fall.
However, Industry Super highlighted that superannuation is well diversed into multiple asset types, meaning members’ funds are able to ride out the COVID-19 virus, despite many of the financial implications being unknown.
Industry Super CEO Bernie Dean highlighted the importance that members do not panic or make rash decisions that will hurt their long-term futures.
“People avoid selling their house during a property market slump because they are worried about making a loss; the same principle should be applied to changing your super fund or investment option immediately after a market drop,” Mr Dean noted.
The superannuation group also noted how members could actually be worse off if they move their funds due to losses being locked in.
At the last major market decline, during the global financial crisis (GFC), savers who moved their money from an average balanced industry fund into cash were $4,000 worse off after three months, $13,800 after a year, $34,800 worse off after five years and after seven years would have lost a whopping $46,000 of potential retirement savings.
“A way to lose money in super after a downturn is to make changes that crystallise your losses,” Mr Dean said.
Mr Dean explained to members that it is important to look at the long-term gains and not focus on the short-term volatility that markets are incurring.
“It is understandable that people are concerned about the impact the coronavirus is having on the economy and their super balance, but it is important to remember that super is a long-term game and the market recovers,” Mr Dean concluded.
nestegg has previously reported The Barefoot Investor’s response about superannuation and the coronavirus.
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