Shares plunge hits super returns, but investors told to sit tight

The worst one-day fall on Australia’s share market in two years has worried investors, and more pain is looking likely.

Carnage on stockmarkets in Australia and abroad is delivering a painful hit to share portfolios and superannuation fund balances, but investors are being urged to avoid pressing the panic button.

Tuesday’s plunge on the ASX, down more than 5 per cent during trade before recovering slightly to close 3.6 per cent weaker, has combined with a 9.9 per cent drop in US stocks in the past week to put super funds on track for falls of at least 4 per cent for 2021-22.

That equates to a $6500 annual drop for the average male super balance of $162,000 and a $5100 loss for the average female balance of $128,000.

However, super specialists and advisers say it’s best to stick to your long-term investment plan, even as stock analysts warn of further market falls ahead.

The ASX was a sea of red on Tuesday. Picture: NCA NewsWire/James Gourley

Super research group Chant West estimates a 4.1 per cent fall for the typical growth fund this financial year, and senior investment research manager Mano Mohankumar said the falls should be put in perspective.

“Last financial year we had a return of 18 per cent – the second highest since the introduction of compulsory super in 1992,” he said.

“Superannuation is a long-term investment, and getting distracted by short-term noise can hurt your long-term investment outcomes.”

SuperRatings executive director Kirby Rappell said balanced super funds could deliver a negative 4-5 per cent return for 2021-22, but switching between fund options could be damaging.

“I am yet to meet anyone who is good at timing markets,” he said.

Association of Superannuation Funds of Australia CEO Martin Fahy said people who were worried should speak with their fund.

“Generally the advice funds would give to people is to not convert to cash, to ride out the volatility and benefit from the upside,” Dr Fahy said.

“The important thing is not to panic when markets dislocate like they are today.

“What we know from the Covid-19 crash was that those people in March-April 2020 who sold into the falling market missed out on the recovery.”

Tiger Brokers chief strategy officer Michael McCarthy said no shares would be immune to the current “car crash in slow motion” in stockmarkets.

“Share markets and asset prices will continue to come under pressure,” he said.

Chant West’s Mano Mohankumar says don’t let short-term noise damage your nest egg.

“Now that the proverbial is hitting the fan everywhere … I would be cautious in the current environment.

“It’s not the time to buy the dip – if you buy the dip at the moment, you are catching a falling knife.”

Midsec adviser David Middleton said the pandemic, war, rising interest rates, higher inflation and talk of a global recession made it “almost certain that you see some sort of market reaction”.

“Everything seems to have negative momentum at the moment,” he said.

“Australia has good quality companies … it’s quite a good opportunity to buy but you might just want to be a little patient and wait until the market steadies, because it could keep on going down for a while.

“I wouldn’t be selling stuff at the moment.”

Originally published as Shares plunge hits super returns, but investors told to sit tight