... AND LET’S NOT FORGET SUPER
Be patient – don’t lock in losses
Sharemarkets are down, interest rates are up. That can make it seem like a no-brainer to switch your super out of a share-heavy balanced or growth strategy and into something a little less lively, such as a conservative or capital stable option. But Bernie Dean, chief executive of Industry Super Australia, cautions against making a hasty move.
“It’s understandable to be concerned about the economy and the prospect of lower super fund returns,” he says. “But it’s important to remember that super is a long-term investment and markets have a habit of recovering.
“Rash decisions, like switching to cash, can lock in losses and lead to a fund member falling further behind as the market recovers.”
Data from SuperRatings confirms that some of the best performing balanced super options have bypassed the worst of the sharemarket downturn and notched up positive returns or only minor falls over the last financial year (see table, below). By comparison, returns on capital stable super funds have averaged around 1% over the last financial year, but the 10-year returns are closer to 5.4%pa – well below balanced options.
Kirby Rappell, executive director of SuperRatings, sums up the outlook, saying “while the 2022 financial year has seen super funds record a modest fall, the benefits of diversification have shone through. When we compare returns for equity, bond and listed property markets to balanced-style portfolios among super funds, these results should be reassuring to members.”
“Superannuation is a long-term investment and patience remains key.
For Australians under 50, the recent market volatility is not expected to have any impact on their retirement. This year’s results are just one out of a 30to 40-year investment for younger Australians.”