The markets are down...but not out
25 Jan 2008
A message from our CEO, Terry McCredden on riding out the current market volatility and looking forward to recovery and long term growth.
After the 11 September 2001 market plunge, many Telstra Super members had their first experience of negative returns. Since having enjoyed several years of exceptional growth, the market is again enduring extreme volatility, and sharemarkets globally are doing their best to cope with a US financial emergency. The sub-prime mortgage crisis and consequent scarcity of credit in the US has driven the downward trend and raised concerns of a US recession. While the fallout has been significant, particularly in the past few weeks - our own S&P/ASX 200 experienced the worst one-day result in 20 years* - the cyclical nature of investment markets suggests that a correction was overdue. |
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Markets are unpredictable and can act irrationally, but historically they have followed an upward curve representing long term growth. Along the way there are periods of instability, which when viewed in isolation may seem disastrous. But when looked at in the context of a 10 year time period, the short term mountains and valleys have smoothed out to become a long walk up hill.
The important thing to remember is that while these falls do affect your account balance on a day to day basis, historically they have had little impact on the long term growth of your super. Of greater importance is your underlying investor profile.
At Telstra Super we have always encouraged members to invest in accordance with their investor profile, which takes into consideration time horizon and personal tolerance to risk.
Each of our Member Investment Choice options carries a risk of negative return, ranging from high risk options such as Telstra Super’s Growth option, which has an approximate risk of a negative return 1 in every 4 years, to low risk options such as Telstra Super’s Conservative option, which has an approximate risk of a negative return 1 in every 8 years.
A period of market volatility does not change a person’s investor profile or reason for investing - in this case to accumulate a retirement benefit.
The question of whether or not the US will fall into recession and what impact this may have on our local market remains unanswered. But experts agree that this period of volatility will impact 12 month returns come 30 June 2008. As always, Telstra Super is monitoring the market closely and endeavouring to take out as much risk as possible from our managed options, aiming to provide value to our members by returning above the market.
History shows us that markets have recovered, and in some instances, they recovered more quickly than expected. Saving for retirement is about accumulating a benefit over a lifetime, it isn’t a race track gamble meant to double your money overnight. During this time of market uncertainty, try to stay focussed on the long term. More information on the principles of investing is available on our Member Investment Choice pages. If you have any concerns about your chosen investment strategy, why not give Telstra Super Financial Planning a call to discuss your situation.
We will keep you informed through our member magazine Moving Forward. You can also subscribe to our Telstra Super Financial Planning e-newsletter for a more in depth look at the market with commentary and advice courtesy of Telstra Super Financial Planning. While our Investment Returns page provides the latest performance results for Telstra Super’s investment options.
Terry McCredden
CEO, Telstra Super
* 7.1% fall Tuesday 22nd January 2008