The outbreak of COVID-19 has had a significant financial impact on global markets, resulting in market volatility. The purpose of this page to give you as much information as possible to help you at this time. This information is general in nature, and we recommend you seek financial advice if you need it.
What’s happening to investment markets and how will this impact my superannuation savings?
Short-term volatility is an expected part of the super journey and does occur from time to time. Superannuation is a long term investment and Intrust Super’s investment portfolio is well-diversified with cash and other defensive assets to help offset some of the losses in share markets. However, market volatility will still impact our portfolio in the short term.
It’s important to remember that markets have historically rebounded from events like this.
In 1987, the All Ordinaries Index which is a long term Australian sharemarket benchmark, crashed from 2306 to 1151 – a fall of 49%. In the first 12 months after the market reached the bottom, the index rebounded by 36%. During the Global Financial Crisis, the All Ordinaries Index fell by 59%. In the 12 months following the market bottom, Australian shares delivered a 55% return1.
The problem is that it’s impossible to predict when the market has hit bottom, and when it will turn and start delivering positive returns. This means that switching investments when markets are falling risks crystallising losses by selling low. This means your investment may not benefit from any market rebound if you switch to a low-risk option at this stage. Sticking to a strategy and continuing regular investments through a volatile market means your ongoing contributions will be buying assets at increasingly favourable prices. While not guaranteed, this strategy is more likely to deliver increased returns as markets recover.
Why do investment markets go up and down?
- Fundamental economics
Fundamental economics relates to how healthy the economy is, and whether it’s likely to grow, shrink, or stagnate. Economic fundamentals include the level of unemployment, business profits, spending, debt levels, and expected future changes in these kinds of measures.
- Market sentiment
Market sentiment refers to what people THINK is going to happen regarding the health of the economy. If people THINK the economy is going to suffer, this causes a lot of financial assets (particularly shares) to lose value. If people THINK the economy is going to boom, this causes a lot of financial assets (particularly shares) to gain value. Most of the time, markets overreact to both good news and bad news – and this is what creates a lot of volatility.
If you are concerned about what you should do with your investments, the best thing to do is seek financial advice. Intrust Super’s team of financial advisers are here to help. You can speak to one of our Intrust360° advisers2 over the phone on 1300 001 360 or by booking an appointment online.
1Source: AXJO (S&P/ASX200) index
2Intrust360° is our financial planning business (its legal name is IS Financial Planning Pty Ltd ABN 64 143 707 439). It’s a wholly owned subsidiary of IS Industry Fund Pty Ltd ABN: 45 010 814 623. It’s also a corporate authorised representative of Link Advice Pty Limited ABN: 36 105 811 836 | AFSL: 258145 | Corporate Authorised Representative Number: 379207.