‘Stay the course’: Aussies warned of the pitfalls of switching to cash during market falls

Australians are missing out on thousands of dollars in retirement savings by making one costly mistake during market downturns.

A simple mistake is costing the average Aussie thousands of dollars in retirement savings each year – and one super fund is sounding the alarm.

Modelling released by Aware Super using their high growth or conservative balance option shows Australians could double their superannuation savings by simply staying in their investment strategy instead of moving during market downturns.

Australians could have doubled their superannuation if they did not switch to cash. Picture: NewsWire / Nicholas Eagar

The analysis shows Australians who stayed invested in High Growth super investment options during the GFC in 2008, rather than switching to cash, saw their super balance more than double by 2025.

A retiree who stays in a more conservatively-balanced pension option, rather than switching to cash, would now have $8500 a year more in retirement income, Aware Super said.

This is even with the ASX getting smashed on “Black Monday” when the global financial crisis hit the local market – dragging it down 16.4 per cent in a single week and nearly 50 per cent over between late 2007 and early 2009.

Aware Super chief investment officer Damian Graham said staying invested in the right superannuation option for your life stage was key, as was understanding that market ups and downs are just a normal part of the investment cycle.

“Australians understandably get nervous when sharemarkets wobble, but history shows that trying to ‘time the market’ by switching to cash can put a serious dent in your retirement savings,” Mr Graham said.

“The most important thing is to not let short-term market noise push you into decisions that

could hurt your long-term retirement goals.

“We want every Australian to have the guidance and confidence they need to build and enjoy the retirement they’ve earned.”

This is despite shares falling by nearly 50 per cent during the GFC. Picture: Gaye Gerard / NewsWire

Mr Graham said the same holds true during the recent Covid-19 downturn with those in a high growth option who switched to cash now $58,000 worse off for every $100,000 they had in their superannuation.

Australians who are in a conservative balanced strategy, who could have lost $113,000 by switching to cash during Covid.

Mr Graham said despite the volatility in the current markets off the back of unrest in the Middle-East and US President Donald Trump’s tariff policy, history suggests members could be better off if they look at the long-term strategy over short-term downturns.

“Key to Aware’s performance was its long-term investment strategy and diversified portfolio, which spreads investments across a range of asset classes, markets and countries, exposing more market opportunities and helping to limit losses if there are falls in any one part of the portfolio,” he said.

Originally published as ‘Stay the course’: Aussies warned of the pitfalls of switching to cash during market falls