Potential risks of switching your super investment options

When markets are falling, and you see your super balance drop it’s natural to feel like you should be doing something. But while making reactive changes might feel like you’re protecting your retirement savings, by doing this, in the long run, it may have the opposite effect and lock in potential losses.

The news often dramatises the daily movements of the investment markets and economic conditions. Reporters create headlines that highlight the short-term market volatility rather than focusing on the benefits of maintaining a portfolio designed to meet your long-term investment objective - to grow your retirement savings.

Ups and downs are normal with super because the value of assets we invest in can fluctuate. If you see your super balance decline, it can be tempting to make a change to a more conservative investment option, like cash. But when it comes to super, it’s important to focus on the long-term, and have an investment strategy that’s right for your personal objectives, situation and needs.

AustralianSuper data shows that some members may lose money when they change investments in reaction to short-term market movements. Members may lock in losses and also miss out on the potential for higher returns by being out of the market when it recovers.1


How switching during the GFC could have cost some members thousands of dollars

The most recent significant market downturn was the global financial crisis (GFC) of 2007-08. Many people felt the impacts of the GFC personally, and many are now extra cautious of any market volatility as a result.

During the global financial crisis share markets experienced an extended period of lower returns and losses. In an effort to avoid losses, some members switched to more conservative investment options like cash.

Share markets eventually recovered to their pre-GFC levels. Unfortunately, many people who had switched investment options didn’t switch back to their original strategy. This had the double negative impact on their savings as they sold when the markets were down and didn’t get back into the market to benefit from the recovery.

The following examples are for hypothetical members, to illustrate the potential impact switching can have on long-term returns 2.

In these examples, each member started with the same $50,000 balance and their balances as at 31 December 2019 are as follows:


Balanced option 
Current balance


Olive stays in the Balanced option. She had some losses during the GFC, but by remaining invested, Olive benefited from the rebound in markets and the subsequent long-term growth of the investment markets. Her balance is now much higher than it was before the GFC.


Balanced option, switched to cash 
Current balance


Roger switched to the Cash option at the bottom of the GFC when the Balanced option’s losses were at their highest, locking in losses, and didn’t switch back when growth returned. He is over $110,000 worse off than Olive who stayed in the Balanced option and his retirement savings are now lower than his balance before the GFC.


Cash option 
Current balance


Antonio is invested in the Cash option the whole time. While experiencing less volatility and no periods of losses, he has also received lower long-term returns. His retirement savings are less than half of Olive’s who is invested in the Balanced option. 

The chart below, shows that if a hypothetical member had stayed in the Balanced option – rather than opting for the Cash option, their current balance would be significantly higher.



The double impact of switching for Olive, Roger and Antonio

The chart below shows that if a hypothetical member had stayed in the Balanced option during the time of crisis – rather than opting for the Cash option, their balance would be significantly higher in the long run. This chart shows the balances of Olive, Roger and Antonio, using the figures in the examples above. Olive - $223,324. Roger, $111,603. Antonio, $104,870.


Based on AustralianSuper data, 31 December 1999 – 31 December 2019. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.

A member, like Olive in this example, who stayed in the Balanced option over the last 20 years to 31 December 2019 would have grown their retirement savings by more than 4 times. An initial $50,000 investment would now be worth more than $220,000.


Market downturn and recovery

As an example of long-term focus, we can look at AustralianSuper’s Balanced option.

Since September 2012, when the Balanced option recovered to pre-GFC levels, this investment option has had two quarters with a return of negative 5%:

  • In 2015 – when the -5% return was recovered within 7 months and
  • In 2018 – when the -5% return was recovered within 3 months

In these downturns, markets recovered quickly, and AustralianSuper investment experts focused on investment strategies to help members achieve the best possible retirement outcome. Switching options during these times may have locked in the losses from the downturn, which would not be recovered by remaining in more conservative investment options.

It’s important to remember that investment markets do not provide a signal of how long a downturn may last, or how quickly the markets will recover. This makes it extremely challenging to improve your returns by switching options. Remaining invested in the market can provide better returns than trying to time the market.




Balanced option - Periods of downturn and recovery, based on monthly returns

Downturn time period Downturn from peak to bottom Months to recover from bottom to previous peak value Cause of downturn
October 2007 to February 2009 -23% 43 Global financial crisis
July 2015 to September 2015 -5% 7 Decline in commodity prices and slowing GDP growth in China
August 2018 to December 2018 -5% 3 US/China trade war and slowdown in global economic growth
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.


Why it can pay to leave the decisions to the experts

AustralianSuper offers a range of PreMixed options, ranging from growth to more conservative options.       

While feeling uncertain about what might happen to your super balance during market fluctuations is understandable, if you’re in one of these options, you don’t need to worry about monitoring markets and managing your investment choices, as the Fund will do it for you.

The AustralianSuper investment team monitor a range of indicators and manage changes in investment markets, as needed, to help protect member retirement savings and maximise your long-term returns.

For more information or advice

Everyone’s situation is different. Where you invest your super depends on your retirement objectives, time horizon and risk tolerance. For general advice on your investment options, super and retirement planning - at any stage of your life - consider speaking to an AustralianSuper adviser.


Please note, that call volumes and wait times are much longer than usual, but we’re doing our best to help members as quickly as we can.


  1. Research showed that the average member was financially worse off for having switched investment options in a sample of over 1.1 million members from 1 July 2009 to 30 June 2014. Owen Scott, The Age of Flawed Reasoning, 2015

  2. Source: Illustrative example of cumulative returns for the period 31 December 1999 to 31 December 2019, based on hypothetical investors starting with $50,000 in the Balanced and Cash investment options and compared to an investor that switches from the Balanced option to the Cash option at the end of February 2009. The examples have been provided for illustration purposes only and aren’t a representation of the actual benefits that may be received or the fees and costs that may be incurred. Returns from equivalent investment options of ARF and STA are used in calculating returns for periods that begin before 1 July 2006. Investment returns are net of investment fees, costs and taxes, but do not include the impact of administration fees, insurance fees and other fees and costs that are deducted from member’s account balances.

Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. The case study is provided for illustration purposes only and isn’t a representation of the actual benefits that may be received or fees and costs that may be incurred.

This information may be general financial advice which doesn’t take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement available at australiansuper.com/pds. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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