Long term focus is key

Don’t panic with sharemarket fluctuations and benefit in the long term

Recent volatility in global markets has highlighted that shares can go down, as well as up. There has been speculation that markets were over-heated and that the falls of this week were an overdue correction.

Following the sharp falls in the early part of this week, markets have moved up and steadied. Media coverage has been significant and has highlighted the need to keep a steady head when faced with sharemarket fluctuation and associated media coverage.

Superannuation is a long-term investment and funds employ experts to manage members’ money for up to 45 years before retirement, and then up to 20 plus years after retirement. The key to managing volatility is not to panic.

Sharemarkets have a long history of sharp falls followed by recoveries. Importantly, over the long term, markets have shown an upward trend as can be seen from this graph of the history of the Australian Share Market since 1938.

 share market history

 

(source https://www.marketindex.com.au/history)

Share prices are influenced by many factors such as business performance, government policy changes and consumer confidence and it’s a rare investor who can perfectly anticipate market movements.

Accepting that superannuation is a long-term investment will help you stay immune to the temptation to sell when the market is down. History has shown that it should go up again over time. For example, between July 2015 and February 2016 the Australian share market fell 13%. By 30 June 2016, it had mostly recovered, ending the year only slightly in the negative.

Seek advice before you make investment decisions

When you join Prime Super it is likely that your contributions were invested in the ‘default’ option. In Prime Super this is called MySuper and is the investment allocated to members when they don’t make an active investment choice. More than 90 percent of Prime Super’s members are invested in this option and it has performed strongly over the long term.

Results just released by ratings agency SuperRatings showed that Prime Super is focused on the short and long-term need for members, delivering top quartile performance in its MySuper option over one, three, five and seven years. (SuperRatings Fund Crediting Rate Survey – Balanced – December 2017)

Of course investment needs can change over time and Prime Super has a number of other investment options that members can choose from. For example, when you’re younger, you may accept a higher level of risk leading to investment in more growth orientated options. Then, as you get closer to retirement a more conservative strategy to preserve cash may be more suitable.

Call us on 1800 675 839 to discuss your investment strategy, investment timeframe and risk appetite. 


This article contains general information only and does not take account of your personal circumstances. You should obtain personal advice where appropriate. Please note that past performance is not a reliable indicator of future performance.