Don’t panic: How to protect your super from global instability

Everything you need to know about superannuation. Source: The New Daily

Surging inflation and plunging share market values could leave you worried about your superannuation, but experts say there’s no need to panic.

Rising interest rates, Russia’s invasion of Ukraine and China’s COVID lockdowns have all contributed to recent declines in Australia’s sharemarket, which lost $57 billion in a single day in May and suffered its worst day in two years on Tuesday.

The ups and downs of the sharemarket might tempt you to make quick changes to your super, but doing so could cost you in the long run if your decisions are poorly thought out.

Industry Super Australia chief executive Bernie Dean said it’s important to remember that super is a long-term investment and markets have a habit of recovering after downturns.

Read on for tips on how to manage the latest sharemarket chaos.

Long term v short term

Crystal Wealth Partners executive director Tim Wedd said members should consider when they will need their savings before making changes to their super.

If you’re planning to withdraw your funds soon, it could be time to act “defensively” and get ready to withdraw what you need.

But if your retirement is a little while off yet, Mr Wedd said it’s unwise to focus on short-term events, as you’re unlikely to ever get the timing of your market decisions 100 per cent right.

“You could almost guarantee that most of the time, you’ll get it wrong,” Mr Wedd said.

“You’ll sell at the wrong time and you’ll buy at the wrong time if you’re investing over a longer period of time.”

Don’t be reactionary

Markets tend to overreact to daily newsfeeds, so making a sudden portfolio change based on a knee-jerk reaction to market volatility could cost you in the long run, Mr Wedd said.

He said you should make changes based on how well your super portfolio is performing over time, which involves comparing your fund’s fees and net returns with that of its rivals.

You can easily compare the performance of different funds by accessing the ATO’s online comparison tool.

Mr Dean advised members to avoid making rash decisions about their super investment strategy during a downturn, like switching to cash, because it could mean they miss out on the benefits when markets rebound.

“Making good decisions with super can be similar to real estate, where people avoid selling during a slump because they are worried about making a loss and know that over the long term values go up,” he said.

Do your research

University of Wollongong lecturer Loretta Iskra said finding out what your superannuation money is invested in will help you better understand how global events are affecting your savings.

For example, if your money is invested in companies such as Microsoft, Apple or Tesla, then Russia’s invasion of Ukraine would have had little impact.

“Once you start to understand what you’re investing in, and understand how your account works, then you’ll know when it’s the best time [to make a change],” she said.

Tailor to your personal needs

If you’re really worried about the health of your retirement savings, you should consider tailoring your super to your needs, Ms Iskra said.

Changes could include making more cash deposits, investing in funds that support sustainability, or moving from having a large proportion of shares to having a smaller amount of shares in a larger selection of accounts.

“With the accounts that are often in place for many members to MySuper, they’re just a general fit of how it is seen to suit most people,” Ms Iskra said.

“However, where individuals have their own concerns, that’s where they might want to tailor their arrangements to cater for their own personal needs.”

You can find out more about investment allocations here.

Seek professional advice

Ms Iskra said whenever you’re considering making a change to your super, getting advice from a financial counsellor or planner makes sense given the long-term ramifications of your decision.

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