Worried about your super following the unstable markets over the past couple of months influenced by the pandemic and its impact on the economy? Great! It means you care about your retirement.

If you’re looking to get more #MoneyFit, check out this video on investment fundamentals and things you should think about before you decide to make any changes. Thanks to our partner Mercer for sharing their expertise.

Video transcript

Robyn Fisher:

Welcome, and thanks for joining me today for this presentation on market volatility by Mercer Financial Advice. This presentation will cover what is occurring in financial markets, how the government is responding and investment fundamentals. The purpose of today's session is to leave you more informed about what is occurring and how you can seek assistance. We understand and appreciate the challenging time that we are all facing. There are changes happening every minute, and the volatility, which is where the market's moving up and down, continues. The figures show the performance of asset classes over the last 12 months to the end of February. Now, the last week of February was the worst for global stock markets since the global financial crisis. The chart shows the annual returns for 12 months still remained positive. Reflecting a longer time horizon. There is no certainty how long this may continue. From Mercer's point of view, markets will only recover fully once the pandemic is under control. The timing of this recovery will depend on how long this takes.

Robyn Fisher:

So what should you do in the current environment? The three key steps would be to stop, think and act, take a breather, make sure all your decisions are informed ones. Think about your personal situation and about the basics of investments. If you feel you need to make a change to your superannuation or investments, you should consider getting some advice, but there are some things that may help. Let's look at the investment fundamental time horizon.

Robyn Fisher:

If you are looking at your Super, keep in mind, it's a longterm investment. A longterm investment timeframe is around seven to 10 years. If you are eligible to withdraw $10,000 under the early release rules, then consider what impact this will have on your retirement plans. This graph shows you the relationship between risk and return. Lower risk means lower investment returns in the long run, and higher risk means that the higher potential returns in the long run. If you want higher returns, then you have to take on a higher risk. The two go hand in hand. We've plotted that relationship on the gray line on this graph. Over the top, we have now placed the four broad categories of what you can invest in with your Super. Cash being the lowest risk, lowest potential return option, and shares being the highest risk, highest potential return option.

Robyn Fisher:

There's no such thing as a no risk investment option. What's the risk of cash? Well, the answer is inflation. What does inflation mean? Well, it means a dollar today is worth less in the future. Think about what you might have paid for a beer 10 years ago and what you would pay today. The beer hasn't changed. It's the same taste, the same size, but it certainly costs more. That is inflation. This graph shows that markets work in cycles. A bull market is when the markets are rising, and a bear market is when the markets are falling. While market corrections are part of the investment cycle, these are unprecedented times. Should I stick to my investment option? Well, before you decide to switch, consider how long will your money be invested for and what is it for? If you switch, you may crystallize a loss. And this means that if you move to cash and the market moves upwards, you might miss out on the recovery. Right now, it's a paper loss until you switch. You have the same number of units, and the price of those units has fallen.

Robyn Fisher:

Remember, this isn't the first time the share markets have fallen, and it won't be the last. History has shown us that once the markets fall, they recover. This chart shows the historical falls in the markets and their recoveries. The red bar shows the time it's taken for the market to fall, and the green bar shows the time it's taken for the markets to recover. Lastly, keep in mind, it's time in the market, which has its benefits over timing the market. This graph shows the value of a hypothetical $10,000 invested on the 1st of January, 1980 and its value if you were invested all along. If you missed the best five, 10, 30, or 50 days of the market, you would be significantly lower in your overall returns.

Robyn Fisher:

Now, let's look at the key mistakes to avoid. It's best to work with an investment plan in a disciplined manner. Don't overthink your losses. They're a small bump when viewed in the rear vision mirror in the years to come. Do not make emotional decisions, and seek advice. We are here to help. Here are some key actions to consider. Revisit your timeframe and the level of risk that you are willing to take in line with your investment objectives. If you have the ability to invest, consider dollar cost averaging to reduce the impact of market timing on your investments. We're living longer, and our financial considerations continue to evolve well past retirement, which ongoing advice can support.

Our presentation today is general in nature and does not take into account your personal needs and circumstances.

For more information on a superannuation fund for you, see our superannuation for individuals page.