The recent fall in the US stock market has caused increased anxiety in global markets, including the Australian share market. This follows an extended period of strong gains in those markets that have benefited NGS Super members who have some of their super invested in Australian Shares, International Shares or a diversified option such as Diversified (MySuper) or Moderate Growth.
However it’s natural that members who are now seeing fluctuations in their superannuation account balance will be concerned about it, and will wonder whether they should stick with their long-term investment strategy or switch to a more conservative investment option. Here are some points to bear in mind:
The correction was not unexpected
After successive record highs, it was widely accepted that a market correction was likely to occur sooner rather than later.
Corrections are normal
Volatility is an inevitable part of investing in share markets and corrections occur regularly. There was a notable correction that took place between December 2015 and February 2016.
Put the correction into context
In relation to major global share markets and in the context of their earlier strong performance, the correction has only brought us back to levels reached in the December quarter last year.
Investment fundamentals are still strong
Despite the market commentary, global economies are performing well and company earnings continue to improve. Inflation is rising slowly in the US while Europe and Japan remain well below central bank targets. Both of these factors should provide continued support to growth assets.
It’s not about slowing economic growth
The correction in markets was not caused by concerns of slowing economic growth, but fears of further rises in interest rates – particularly in the US.
Diversified investment options should mitigate the effect of the correction
Most NGS Super members are invested in a diversified option – usually in one of our default investment options (Diversified (MySuper) for Accumulation accounts and Moderate Growth for Income accounts). While these options do have exposure to both international shares and Australian shares, they are well diversified across multiple assets such as property, infrastructure, fixed interest and other alternatives. These assets tend to perform differently to share markets and this provides a good buffer against reductions in share valuations.
Members who ‘panic switch’ could miss out on the market rebound
Historically, most market corrections are followed fairly quickly by a rebound. There’s a chance that members who ‘panic switch’ could crystallise a loss by switching out of their long-term investment strategy into more conservative options, and then miss out on the rebound when markets recover.
It’s important to consider your investment timeframe and risk appetite before making a decision to alter your investment strategy. If you have any questions please contact our Helpline on 1300 133 177, Monday to Friday between 8am – 8pm AEST/AEDT. If calling from outside Australia phone +61 3 8687 1818. Alternatively, you can speak to your financial adviser.
More like this
First Home Super Saver Scheme: What you need to know
Milestone for Australia’s first social benefit bond
A investment update regarding one of our ethical investments. Continue reading
The US Election 2016 – What is NGS doing?
With the US election causing various concern, we would like to share our analysis on the potential financial impacts of the US election outcome with our members. Continue reading
A short view on the impact that this has caused through the investment world. Continue reading
SMSFs losing money – Australia’s growing problem
Understand the SMSF craze and our thoughts. Continue reading
Invest for social impact
NGS Super’s pioneering social benefit bond can benefit both investors and vulnerable children. Continue reading
Are self-managed super funds worth it?
A desire for control has led many Australians to investigate self-managed super funds (SMSFs). Understand the ins and outs before you commit to an SMSF. Continue reading
Your super vs your bank
How to get the best return on your retirement savings Continue reading
Thinking about DIY super?
Here we give a high level overview of some important factors you need to consider for SMSFs Continue reading
Your super vs. your bank: are all cash payments the same?
Knows the pros and cons around each option. Continue reading