Don't let fluctuations in the share market derail your superannuation investment strategy.
Market volatility can be unsettling, but it's important to stick to your investment plan. Moving your investments to cash or safer options after the market drops essentially locks in your losses. Decisions made out of fear are usually not the best, and acting on impulse can be costly. Timing the market is very difficult, so if you switch back to growth assets before the market rebounds, you might miss the recovery.
On the bright side, during a market downturn, your regular superannuation contributions are buying assets at lower prices. When the market recovers, these assets could increase significantly in value.
Experiencing the ups and downs of the financial markets is a natural part of investing. While market volatility can be stressful, especially for those nearing or in retirement, it’s important to maintain a long-term perspective and continue following your investment strategy, as long as it still aligns with your goals. Even if you're close to retirement or already retired, you still have many years of investing ahead.
If your superannuation is in a balanced or growth option, diversification plays a vital role in protecting your balance from major market swings. This diversified approach helps ensure your superannuation remains stable over time.
For those in a large APRA-regulated fund, there are pre-mixed diversified options available. If you manage your own SMSF, it’s essential to ensure your investment strategy covers key factors like diversification, risk, and return. As an SMSF trustee or director, you’ll need to manage this yourself or seek advice from a licensed financial adviser who can help create a strategy tailored to your fund and members’ needs.
If market volatility is causing you significant stress, it might be helpful to check your investments and superannuation balance less frequently. By focusing on the long-term view instead of daily fluctuations, you can gain a clearer understanding of your financial progress without unnecessary worry.
As the saying goes, “it’s not about timing the market, but about time in the market.” The main point is to remain patient, stick to the core principles of diversification and asset allocation, and always feel free to seek advice when needed.
