The market changes we’re seeing at the moment are causing many members a lot of worry. In times like these, it can be reassuring to turn to the experts and look at the data your fund has before making any decisions which could impact your future balance.
AustralianSuper research shows that switching investment options in a period of market downturn may not give improved results over the long term.1 But what does that mean?
In the video below AustralianSuper portfolio manager, Justine O’Connell, provides some expert insight into the recent volatility in investment markets and explains why it can be wise for you to keep a focus on the long term.
Justine O’Connell on potential risks of switching investment options
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Hi, I’m Justine O’Connell. I’m the senior portfolio manager for the Balanced option.
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 out of the investment option right.
We have undertaken substantial research on switching patterns of the Funds’ members, 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.
See chart at 1.12 of the video.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
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.
Therefore, staying invested in the market can provide better returns than trying to time the market.
When trying to work out what’s right for you, consider your personal objectives, situation and needs.
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 behalf of our members:
The first is: We build diversified investment option portfolios (PreMixed options are diversified by asset class). 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.
Second: We monitor markets, economies, and indicators, and adjust the Fund’s investments and the strategy of each investment option to help maximise your retirement savings, and to manage risk.
The question you need to ask: Is it worth 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 – please visit our website for information on the investment options available to you, as well as details on your financial advice options.
Video recorded: March 17 2020.
Justine’s 3 key takeaways
1. Take a long-term view
Super is about the long-term and AustralianSuper aims to build investment options that deliver to their return objectives through market cycles.
Remember, the superannuation changes you make now can affect your retirement balance substantially.
2. Leave it to the experts
When it comes to something as important as your retirement, it can pay to leave it to the experts. AustralianSuper has built a team of over 150 investment experts who are trained to manage the portfolio through all market conditions.
The Fund does several things on members behalf:
- It builds diversified investment option
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.
- It monitors markets, economies and indicators
And adjusts the Fund’s investments and the strategy of each investment option to help maximise your retirement savings and manage risk.
3. Avoid taking unnecessary risks
The question you need to ask is:
Is it worth taking unnecessary risks such as moving away from your existing investment option, based on short term volatility?
AustralianSuper experts have undertaken substantial research on switching patterns of the Funds’ members1, and found that, on average, these decisions left many members worse off over the long-term than had they done nothing.
Why it can pay to leave the decisions to the experts
AustralianSuper offers a range of PreMixed options, including the Balanced option, High Growth and Socially Aware.
The expert AustralianSuper investment team is working around the clock to monitor investment markets and make decisions that help protect member retirement savings and maximise your long-term returns.
It’s completely understandable to feel uncertain and wonder what might happen to your super during times of volatility. If you’re in one of our PreMixed options, you don’t need to worry about monitoring markets and adjusting your portfolio, as the Fund is doing it for you.
Get more information or advice that’s right for your needs
Everyone’s situation is different. Where you invest your super depends on your retirement objectives, time horizon and risk tolerance, and although history indicates that markets recover after periods of volatility*, if you have concerns about changes to superannuation, you should consider seeking advice.
- Member switches: Member switches reviewed between July 2009-June 2014. Data from 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.