Australians warned to think twice before switching investment options
Australians have seen their super balances plummet with the coronavirus crisis, but experts warn one wrong move now could prove financially disastrous.
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Retirement plans have taken a huge hit in recent weeks, stripping thousands of dollars off the balances of hardworking Australians.
Sharemarkets, both locally and internationally, have suffered huge losses amid the COVID-19 pandemic – just last week the ASX suffered its biggest one-day fall since the 1987 crash, closing down 9.7 per cent.
But experts say reacting to market volatility instead of looking into the future could prove financially disastrous.
QSuper has 585,000 members and its chief investment officer Charles Woodhouse warned Australians to think twice before changing their fund’s investment option.
“History has shown that reacting quickly to market volatility instead of taking a longer-term view with a well-balanced portfolio can be costly,” he said.
“Don’t make any hasty decisions.
“If you are thinking about making changes, seek advice from a professional who will consider your age, financial situation and personal circumstances.”
Members can change their fund’s investment option on any weekday and the investment option must be changed by the fund within three working days.
But the Association of Superannuation Funds of Australia’s chief executive officer Dr Martin Fahy said despite “anxious times our system superannuation is strong, well managed and well regulated”.
He said funds hold diverse portfolios of investments including cash, property, government bonds, infrastructure and other assets.
“While the volatility of equity markets is concerning, we know that funds have in their stress-testing planned for this,” Dr Fahy said. “They have planned for market shocks and are executing those plans.”
He said younger Australians should take a long-term view of their retirement money.
“If you are in your 20s or 30s you are not going to be retiring for another three decades,” he said. “Then, just as we rode through the GFC, we can right through the ups and downs of this market shock.
“There’s a danger if people don’t take a considered approach they are going to switch to cash at precisely the wrong time and miss the recovery.”
Mr Woodhouse said they had seen a small proportion of members switch out of shares to more defensive options recently.
But research house SuperRating’s executive director Kirby Rappell said for older Australians they would be less likely to be impacted by the recent sharemarket falls.
“Older members are more likely to be in more conservative options which have been less impacted,” he said.
“We suggest members talk to their fund, or an adviser who they trust, to help ensure any decision is aligned with a long-term strategy.”
INVESTMENT OPTIONS
Growth: About 85 per cent in shares or property and 15 per cent in fixed interest or cash.
Balanced: About 70 per cent in shares or property, 30 per cent in fixed interest or cash.
Conservative: About 30 per cent in shares and property, 70 per cent in fixed interest or cash.
Cash: 100 per cent in deposits.
Originally published as Australians warned to think twice before switching investment options
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