A bumpy ride for super
Craig Turnbull, Chief Investment Officer
Anyone watching the news – or their super balance – knows that Australians are currently experiencing economic challenges on multiple fronts.
In the first few months of the year, the events in Ukraine, catastrophic flooding in parts of Queensland and NSW, supply chain issues, the rising cost of living and subdued wages growth, all combined to keep consumer sentiment and markets flat. Then, in recent weeks, the global shift to higher-interest rates sent markets tumbling.
Super fund members have seen the impact first-hand, with super balances taking a direct hit. In an ABC news article published in February 2022, Director of Research at Rainmaker Information, Alex Dunnin, estimated that the average default super fund in Australia lost 3.9 percent in January alone. “That means Australians with default super have lost about $4,000 on average,” the article said, and markets have tumbled further since then.
While it’s a nervous time for super fund members, particularly if you’re in or nearing retirement, it’s important to remember that Active Super deploys multiple strategies to manage the long-term performance of your investments.
Diversification is key
Diversification is essential to riding out market cycles and one of the big advantages of managed investment like super. Beyond shares, Active Super also invests in other asset classes like property, bonds, private equity, alternatives and cash. When one asset class performs poorly, others might perform better, thereby reducing the impact of volatility on your portfolio as a whole.
Right now, for example, while share and bond markets have fallen, alternative assets (including property) have been giving positive returns. While these have not been enough to fully offset losses in other areas, they have provided some protection for Active Super members.
Time is important
Markets go up and down but historically, share markets have always corrected themselves after a fall. Furthermore, market rebounds can happen quite quickly. For example, when you look at how the share market reacted when the pandemic hit in 2020, it had returned to pre-pandemic levels after 12 months.*
This means that if you’re a long-term investor with super, short-term market movements may not be so important.
Even for those members in or nearing retirement, some exposure to risk can help to preserve and grow their money over time. For example, even a small portion of a portfolio with some risk attached has the potential to generate some return in retirement. This can be an important consideration as people are generally living longer and their retirement savings have to last longer as well.
Timing is impossible
As the old saying goes, ‘no-one rings a bell at the top of the market’ - or the bottom for that matter. We only know when the market has peaked or troughed after the fact. So it can be risky to try to sell at the top of the market and buy back in when you think shares are at their cheapest.
Being invested in the market through different cycles increases your chances of benefitting from market upswings and lowers your risk of locking in losses when markets are down.
So what should you do?
While we don’t have a crystal ball, there may be some hope on the horizon. Inflation, for example, has contributed to market volatility, because it has led to increases in interest rates. Inflation may remain elevated for a while, but we expect it will eventually ease back. This should create a better environment for the markets. However, this will take some time.
In times of financial uncertainty, it’s important to be diversified and make sure your retirement savings are being managed by a team that has a good track record of helping investors grow their super over time. At Active Super, we tick both those boxes.
As at 18 May 2022, Active Super is among Canstar’s top-performing super funds** and we’re also among the top performing funds on the ATO’s YourSuper comparison tool. (Note – the ATO site still has us listed as Local Government Super.) See for yourself how our performance compares us to other super funds.
If you have any questions or concerns about your super, please don’t hesitate to call our friendly team on 1300 547 873 weekdays between 8.30am and 6.00pm, or email us anytime on firstname.lastname@example.org
*Past financial performance is not a reliable indicator of future performance.
**As at 18 May 2022, Active Super is ranked among Canstar’s top six funds for 18-49 year-olds with a balance up to $250,000 based on returns over 5 years in the Accumulation Scheme. Past performance is not a reliable indicator of future performance.