The markets have rebounded...now what?
September 15, 2020
If you're struggling to keep track of the markets and what to do with your super, you'd be forgiven.
It wasn’t that long ago in February 2020 when global equity markets were at all-time highs, and then the COVID-19 pandemic set in. World markets went into free fall and in the space of a month 30% was wiped off global equities. Incredibly, the Australian stock market went on to stage a recovery, rebounding by 32% over the next 6 months, to 1 September 2020. The markets continue to have good and bad days.
So, with the markets continuing to be volatile what should you do with your super? If you made an investment switch when the markets were falling, you may be considering making another change as markets recover. Here’s some questions to ask yourself before making any changes to your super.
Do you run the risk of crystallising a loss?
The recent volatility caused some people to lose their confidence in the market, and in response they switched their super to cash at market lows. However, now markets have rebounded it may be tempting to switch back into higher risk options which could have the effect of crystallising a loss.
If you are considering a change to your investments it’s important to remember that super is a long-term investment and therefore you should consider how your strategy suits your risk tolerance regardless of what the markets are doing.
If the market falls again what should you think about?
We’re likely to be living with market volatility for some time, so it’s important to consider what you’ll do if markets crash again. Will you ride it out and stick with your current investment strategy? Would you prefer to be more conservative? If you switched during the market falls or were tempted to switch you should think carefully about your risk tolerance.
It’s important, now more than ever, to decide on your appetite for risk regardless of how the markets are performing. Super is for the long-term and you can generally expect low or negative returns from time to time particularly if you are invested in riskier options.
If you’re unsure of your risk tolerance you can get advice about your investments over the phone by speaking with an Adviser from TelstraSuper Financial Planning. This type of advice won’t cost you anything extra as it’s included in your membership fees.
Do you need to consider taking a risk to achieve your goals?
With markets rising and falling, higher risk options mean your super balance may fluctuate. There are investment options that aim to provide higher levels of growth, and ones that aim to provide more security. Understanding what your long-term goals are and which strategy will help you achieve them, is important.
Super is a long-term game, and once you decide on your goals for the future your strategy should follow. Volatility in investment markets is normal, so if the highs and lows are taking their toll on you it’s best to seek financial advice.
Have you sought advice?
If you want to discuss your super, you can speak to an Adviser from TelstraSuper Financial Planning over the phone at no additional cost. They can work through some questions which will help determine what option you may be suited for. You can speak with an Adviser by calling 1300 033 166 or filling out our online contact form.
What will happen next?
It’s impossible to predict what will happen in the next 12 months as this year’s circumstances are so unusual.
It's easy to be spooked by instability, but it's important to remember super is a long-term investment, and you need a strategy that aligns with your needs and goals. If you are comfortable to weather the volatility, history shows that staying the course through the ups and downs is often better than trying to time the market highs and lows.
† Any general advice on this website has been prepared without taking into account your objectives, financial situation or needs. Before you act on any general advice on this website, you should consider whether it is appropriate to your individual circumstances.