In this article we\u2019ll address the reasons for this and what it means over the short and long-term.<\/p>\n
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The COVID-19 crash<\/h3>\n
Your 2020 super balance has bounced around because COVID-19 has forced lockdowns around the world.<\/p>\n
As the world\u2019s economy largely depends on people getting together \u2013 in shopping centres, offices, stadiums, bars and airports\u2014countries grounded to a halt.\u00a0 As the crisis began to unfold in Wuhan, Lombardy, London, New York and Auckland – share prices tumbled too.<\/p>\n
Impact depends on how your money\u2019s invested<\/span><\/span><\/h3>\nIn 2020 super balances haven\u2019t just fluctuated downwards. As Governments and central banks flung masses of cash at the problem (and a clearer picture of the virus\u2019 weaknesses emerged), share prices soared back up. The US and German markets both had an increase of over 20% in the June quarter.<\/p>\n
So, what do all these numbers tell us about the nature of your super balance?<\/p>\n
Growth fund<\/strong><\/em><\/p>\nIt will fluctuate. And it will fluctuate in proportion to the percentage of growth assets in your super fund options. If you\u2019re in a Growth2<\/sup>\u00a0fund where perhaps 85% of your money is in shares and property, short-term falls in the sharemarket will be reflected in your super balance.<\/p>\n
Balanced fund<\/strong><\/em><\/p>\nThe same is true\u2014but to a lesser extent\u2014if you\u2019re in a balanced fund where you could have up to 70% of your money invested in shares and property.<\/p>\n
Conservative<\/em><\/strong><\/p>\nIf you\u2019re in Conservative or Cash options, your balance won\u2019t move so much with the market as most of your capital is invested in low-return, low-risk options like cash and short-term government securities.<\/p>\n
Higher returns mean more movement<\/strong><\/span><\/span><\/h3>\nThe crucial point is that this movement\u2014the volatility\u2014is the price you pay for higher returns.<\/p>\n
In fact, over 10 years, the average person invested in a Growth super fund outperformed those invested in a Conservative super fund by more than 2% per year3<\/sup>.<\/p>\nThat may not sound much, but super is a long-term investment and two percent extra a year, compounding over decades, can make a serious difference to the amount of money you retire on.<\/p>\n
Determining your comfort level with volatility<\/span><\/span><\/h3>\nEvery person\u2019s super plan is different.<\/p>\n
If you\u2019ve got a long time till retirement and you can look past short-term changes in your super balance, you may find that taking a more aggressive approach with your investment options is ok. This means your portfolio would have greater exposure to higher risk assets like shares and property than those with lower risk, cash and fixed income.<\/p>\n
As you get closer to retirement, or if your super is all you have to rely on in retirement, a more stable super balance could be desirable so more conservative investment options may suit you.<\/p>\n
Take control of your super<\/span><\/span><\/h3>\nThe best thing you can do is review your investment options and make sure they\u2019re tuned to suit your age, attitude to risk, current financial circumstances and long-term plans. Speaking with a\u00a0financial adviser\u00a0might make that review even more effective. Please contact us on |PHONE|.<\/p>\n
\u00a0<\/p>\n
1\u00a0ASFA:\u00a0The benefits of Australia\u2019s compulsory superannuation system\u00a0\u2013 June 2020<\/span>
2\u00a0We\u2019re using categories from\u00a0Moneysmart.gov.au<\/a>. The exact numbers may differ slightly depending on the investment manager you\u2019re with. The principles remain the same.<\/span>
3\u00a0Chant West:\u00a0Super funds navigate crisis to deliver surprise result\u00a0\u2013 17 July 2020<\/span><\/p>\n\u00a0<\/p>\n
Growth fund<\/strong><\/em><\/p>\n
It will fluctuate. And it will fluctuate in proportion to the percentage of growth assets in your super fund options. If you\u2019re in a Growth2<\/sup>\u00a0fund where perhaps 85% of your money is in shares and property, short-term falls in the sharemarket will be reflected in your super balance.<\/p>\n The same is true\u2014but to a lesser extent\u2014if you\u2019re in a balanced fund where you could have up to 70% of your money invested in shares and property.<\/p>\n If you\u2019re in Conservative or Cash options, your balance won\u2019t move so much with the market as most of your capital is invested in low-return, low-risk options like cash and short-term government securities.<\/p>\n The crucial point is that this movement\u2014the volatility\u2014is the price you pay for higher returns.<\/p>\n In fact, over 10 years, the average person invested in a Growth super fund outperformed those invested in a Conservative super fund by more than 2% per year3<\/sup>.<\/p>\n That may not sound much, but super is a long-term investment and two percent extra a year, compounding over decades, can make a serious difference to the amount of money you retire on.<\/p>\n Every person\u2019s super plan is different.<\/p>\n If you\u2019ve got a long time till retirement and you can look past short-term changes in your super balance, you may find that taking a more aggressive approach with your investment options is ok. This means your portfolio would have greater exposure to higher risk assets like shares and property than those with lower risk, cash and fixed income.<\/p>\n As you get closer to retirement, or if your super is all you have to rely on in retirement, a more stable super balance could be desirable so more conservative investment options may suit you.<\/p>\n The best thing you can do is review your investment options and make sure they\u2019re tuned to suit your age, attitude to risk, current financial circumstances and long-term plans. Speaking with a\u00a0financial adviser\u00a0might make that review even more effective. Please contact us on |PHONE|.<\/p>\n \u00a0<\/p>\n 1\u00a0ASFA:\u00a0The benefits of Australia\u2019s compulsory superannuation system\u00a0\u2013 June 2020<\/span> \u00a0<\/p>\n
Balanced fund<\/strong><\/em><\/p>\n
Conservative<\/em><\/strong><\/p>\n
Higher returns mean more movement<\/strong><\/span><\/span><\/h3>\n
Determining your comfort level with volatility<\/span><\/span><\/h3>\n
Take control of your super<\/span><\/span><\/h3>\n
2\u00a0We\u2019re using categories from\u00a0Moneysmart.gov.au<\/a>. The exact numbers may differ slightly depending on the investment manager you\u2019re with. The principles remain the same.<\/span>
3\u00a0Chant West:\u00a0Super funds navigate crisis to deliver surprise result\u00a0\u2013 17 July 2020<\/span><\/p>\n