If you’ve been following business news reports lately, you may be tempted to cash out of your investments and put your money under a mattress. However, it’s important to remember that super is designed to go through troughs and peaks and ultimately reward you for staying invested. 

While financial markets remain unsettled as the era of ultra-low interest rates has come to an end, it is important to remember that superannuation is a long-term investment.

As part of our strategy to manage the long-term performance of your super, Active Super invests in a range of asset classes to help reduce the impact of market volatility on your portfolio. Diversification has an important part to play during times of uncertainty and is one of the major advantages of managed investments like superannuation. 

At times like this it is beneficial to hold a wide variety of assets besides shares and bonds such as office buildings, industrial buildings, private companies and private debt that can keep producing income.

As many members know, investing is a complicated process involving a range of factors like research, asset prices, geopolitical impacts, currency fluctuations and commodity prices. When combined, these factors affect how investments perform and this often requires a long-term investment horizon. 

Protecting your super

No one likes to see investment markets slumping, and depending on your age, you will have a greater or lesser tolerance for a year of weaker returns. Members aged in their 20s are more likely to be able to withstand multiple market downturns without it impacting the end goal of retirement. On the other hand, those who are closer to retirement age will have less risk tolerance and will likely tailor their superannuation investments as required.

Active Super has devised a series of investment stages and suggested age brackets. We tested the new lifestage strategies by modelling different age, salary and balance scenarios to see how they could affect your final super balance at retirement. 

Our modelling scenarios included real-life market cycles and events like the Global Financial Crisis (GFC) in 2008. Even with such significant market downturns, the new strategy we’ve selected has the potential to significantly increase your final super balance compared to the current MySuper product. You can find out more here.

 Regardless of your situation, the long-term view is important for two key reasons: compounding and retirement outcomes. The superannuation system is designed as a long-term investment. It is structured to allow all positive returns to be added to a member’s investment total and reinvested year after year. 

Withstanding crises

Since compulsory superannuation was introduced 30 years ago, there have been a number of global economic shocks that have impacted markets – the 2000 dot com bust, the GFC and now COVID-19. Investors who panic and pull their investments in a crisis run the risk of crystalising their losses and may miss out on the opportunity to recoup their balances when markets recover. 

Volatile periods are expected in investing, which is why super funds invest across a range of asset types to protect members from volatility. The key to remember is that over a long-term horizon, super investments will typically grow.

Seek Advice

Active Super’s team of financial planners is ready to assist if you seek retirement advice. Feel free to contact us on 1300 547 873 or make an appointment to see how we can help you live your best life.^

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