How does the market affect my super?
The affect of the market on your super depends on the choices you made regarding your investment options.
Depending on what investment option you're in, a proportion of your super may be invested in shares, listed property, cash and government bonds. Investments in Australian or international company shares and property are largely affected by market fluctuations, caused by changes in the global and local economic climate.
Take shares, for example, during a period of global economic growth, a company may experience increased profits and a rise in share price, which will increase the value of an investment in those shares.
In such an environment you may see some big changes to your super balance if you had chosen to invest in shares. While this might be uncomfortable in the short term, it’s important to remember that markets are cyclical. In some years you will experience low and even negative returns but over the long run, Australian and international shares continue to be the best performing asset class.
Negative returns
The type of investment options you choose within super generally indicate whether the investment is a short, medium or long term investment. For those about to retire it’s important to remember that you may be retired for a substantial period of time. In some cases it may well be over 30 years. This is a significant length of time and may be long enough to recover from any losses or fluctuations within your investment.
Although this may be the case, when putting together your investment strategy at retirement, it is still important to bear in mind that you might require some of your superannuation savings during your retirement (e.g. to supplement your income needs or to meet certain expenses). You should speak to your financial adviser to ensure your super is invested in a manner which allows you to meet your short, medium and long term goals.
Also, when markets start falling, it’s not uncommon for some investors to get nervous and try to halt the falls, usually by moving their investment out of growth assets like shares and into more defensive asset classes, like cash.
This may not be the appropriate action to take and if you’re nervous about your super and the impact of market falls, make sure you speak to your financial adviser to discuss your specific situation and long term savings goals. They will be able to assist in ensuring your superannuation is invested to extract the best value for you over the long term.
Learn more about Security
- Is my super secure?
- How does the market affect my super?
- Who regulates or governs super in Australia?
- What laws apply to my superannuation?
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