Shares plunge: investors and super fund savers should keep calm

In less than a month Aussie stocks have sunk more than 10 per cent, and more falls could come, so what do the experts say?

Aussie shares are suffering their worst period since the start of the pandemic and have hit an official correction by falling 10 per cent, but the message from analysts, economists and advisers is clear.

Investors and super fund members should not panic, should stick to their long-term plan and see this weakness as a buying opportunity, they say.

The All Ordinaries index of 500 companies has slumped up to 10.6 per cent from its record high reached on January 4 as financial markets worry about surging global inflation and interest rate rises.

AMP head of investment strategy Shane Oliver said share market corrections of up to 20 per cent were healthy and normal, even though stressful for investors, but selling now would “lock in a loss”.

“It’s quite nervous now and we could still come down a bit further,” he said.

“These things happen – it’s the price we pay for the higher returns we get from shares over long periods.

“Selling shares or switching to a more conservative investment strategy whenever shares suffer a setback just turns a paper loss into a real loss, with no hope of recovering.”

Dr Oliver said lower-priced shares offered higher long-term growth prospects, and investors could “average in over time”.

Share prices are tipped to remain volatile this year. Picture: NCA NewsWire / Damian Shaw

“The key for investors is to try to avoid timing the market, and focus on their long-term strategy,” he said.

Whatever happens with share prices, Aussie stocks still offered attractive dividend incomes and companies were less likely to cut dividends, Dr Oliver said.

Baker Young managed portfolio analyst Toby Grimm said the current volatility suggested markets could potentially fall further, but “history suggests losses will be recovered in time”.

“Don’t panic and do something you will regret later,” he said.

“Take advantage of the sell-off in the market to add to your portfolio.”

Mr Grimm said markets often overdid rises and falls, so there might be better buying opportunities in the coming days and weeks.

Super fund members have a long-term investment time frame and can afford to ride out short-term volatility, and Mr Grimm said people’s investment decisions around their super would depend on whether they were using it to accumulate wealth or pay themselves a retirement pension.

“It comes down to what stage you are at – if you have time to wait, I would be riding it out at this point,” he said.

But retirees who could not afford to lose any of their assets should generally be more conservative.

CreationWealth senior financial adviser Andrew Zbik said many super fund members were effectively buying shares at today’s discounted prices through their regular employer contributions.

“Most people’s contributions come monthly or quarterly so they are averaging in,” he said.

Investors with some spare cash could consider putting one third or half of it into the sharemarket, Mr Zbik said.

“Don’t use all your cash because there could be more opportunities,” he said.

“I’ve been waiting for this for nine months – I’m just starting to look at moving client money into the market.”