Superannuation in times of market volatility

THE 2020-21 FINANCIAL YEAR WAS A VERY POSITIVE YEAR FOR SUPER FUNDS, WITH MANY DELIVERING THEIR HIGHEST INVESTMENT RETURNS IN OVER TEN YEARS¹.

Unfortunately, at the beginning of 2022 investment markets took a downward turn and returns across all super funds have been impacted by this and the global market volatility that continued to the end of the 2021-22 financial year. It’s difficult to see your super balance fall during a market downturn, but negative returns happen from time to time. A danger during periods where returns are negative is losing confidence in a solid, long-term investment strategy, and making a change to hold an asset that may feel safer, such as cash. Super is a long-term investment. Even a 65-year-old, with an average life expectancy of 15-20 years, is still a long-term investor. Looking back, negative returns in super are rare. A negative return in 2021-22 will be only the fifth in the 30 years since compulsory super was introduced in 1992. Holding cash over long time periods is less likely to lead to successful retirement outcomes compared to taking a diversified approach to your investments. Super funds, such as BUSSQ, maintain a diverse portfolio of investments within their pre-mixed options and this is designed to provide some cushioning in volatile times. It’s impossible to eliminate the ups and downs that we see in financial markets. After each downturn, such as the last near the start of the COVID pandemic in March 2020, typically markets eventually stabilise, recover their losses and achieve new highs. But if you aren’t invested when recoveries occur, then you might end up bearing the pain of the losses without the benefits of the eventual recovery, whenever that might occur.

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