AustralianSuper portfolio manager Justine O’Connell gives insight into the recent volatility in investment markets and explains why it can be wise to keep a focus on the long-term.
AustralianSuper has built a team of over 150 investment experts who are trained to manage the portfolio through all market conditions.
Specifically, the Fund does 2 things on members behalf:
- Builds diversified investment option portfolios. This approach reduces the volatility that our members experience, so that you can remain invested through market cycles. We do this by combining a range of asset classes including shares, fixed income, cash, property, infrastructure and foreign currency.
- Monitors markets, economies and indicators and adjust the Fund’s investments and the strategy of each investment option to help maximize your retirement savings and manage risk.
Justine says: ‘Periods of market volatility have occurred through time and dramatic news headlines can be unnerving.’
‘While it may be tempting to switch in and out of more conservative investment options in an effort to protect your savings, unfortunately, investment markets don’t provide a signal of how long a downturn may last, or how quickly the markets will recover.’
‘The question you need to ask is: Is it work taking unnecessary risks by trading your super assets?’
In the video below Justine explains why it may be beneficial for members to focus on the long-term.
Potential risks of switching investment options
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Show Transcript
Understanding the potential risks of the investment option you choose is a key element of managing your super.
Periods of market volatility have occurred through time and dramatic news headlines can be unnerving.
They make it tempting to switch in and out of more conservative investment options - in an effort to protect your savings.
Unfortunately, investment markets don’t 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, as you need to get the timing of the both switch into and our investment options right.
We have undertaken substantial research on switching patterns of the Funds’ members, (Member switches July 2009 - June20142),and found that, on average, these decisions left members worse off than had they done nothing.
For example, during the Global Financial Crisis, some members switched to more conservative investment options to try and avoid losses. Please refer to graph in video at 1.12 mins.
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.
This is why AustralianSuper has built a team of over 150 investment experts who are trained to manage portfolios. Specifically, we do 2 things on members behalf
1. We build diversified investment option portfolios, called our PreMixed options. This approach reduces the volatility that our members experience, so that you can remain invested through market cycles. We do this by combining a range of asset classes including shares, fixed income, cash, property, infrastructure and foreign currency.
2. We monitor markets, economies and indicators and adjust the Fund’s investments and the strategy of each investment option to help maximize your retirement savings and manage risk. The question you need to ask – is it work taking unnecessary risks by trading your super assets?
Remember – super is about the long-term and we aim to build investment options that deliver to their return objectives through market cycles.
If you have questions about your investment strategy, or what to do during periods of volatility – visit our website for information on the investment options available to you as well as details on your financial advice options.
End Transcript
1. AustralianSuper data
2. Member switches – Owen Joseph Scott, 2015
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
Cumulative returns over the past 15 years, 1/1/2005 to 9/3/2020, do not include the impact of administration fees that are deducted from account balances. Insurance and other fees and costs may also apply. Returns from equivalent investment options of the ARF and STA super funds are used in calculating returns for periods that begin before 1 July 2006.
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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