What does market volatility mean for you?

Market swings can be troubling when it comes to your money and it’s only natural to be concerned. The best course of action is to be prepared and take a long-term view. The good news is that there are proven strategies for dealing with market ups and downs that can help you focus on what matters when the news is filled with scary, headline-grabbing messages about struggling markets.

“If investing is entertaining, and you’re having fun, then you’re probably not making any money. Good investing is boring.” George Soros


Know that your super is safe with Aware Super 

As one of the largest super funds in the country we have more than $150 billion invested in a diversified range of asset classes including Australian and overseas equities, fixed income and credit securities, cash, and real assets like property, infrastructure assets and private equity. We have a long and established track record of managing super with good returns and of being safe stewards of our members’ funds. 

Focus on the long game

Sometimes markets are volatile as investors react nervously to changes in the economic, political, and corporate environment. Investment markets dislike uncertainty and are prone to overreact to events that cloud the short-term outlook. It’s important to recognise that super is a long-term investment, and when viewed through a longer-term lens most corrections are relatively insignificant.

In fact, market corrections and periods of volatility are a normal part of healthy, functioning markets. Markets move through stages of growth, slowing down and speeding up. Unfortunately, the exact timing of these cycles is largely unpredictable. While dramatic moves in the market can make you question your investment plan, it’s important to remember not to panic, to focus on the long game, and not get distracted by short-term events. 


While it’s natural to want to protect your portfolio after a market decline by switching into cash, it also raises the question of when to get back in. The chart below shows why this strategy doesn’t work successfully for most investors. By missing the best weeks in the market, investors greatly affect their potential returns. For example, an investor who stayed invested in the Aware Super High Growth option over 22 years would have seen their $10,000 investment grow to $47,506. If that same investor missed out on the best consecutive 50 days between 13/7/2009 and 21/9/2009, their $10,000 investment would have only grown to $41,664.  

Keeping focused on your long-term investment goals can quieten the media noise around falling markets and help prevent you from making rash and emotional investment decisions that don’t follow your plans. Timing the market successfully is one of the hardest things to do. As the investing adage says: “It’s time in the market and not timing the market that’s important.” Sticking to your long-term strategy is normally the best approach. Missing the best days in the market by selling your investments and holding cash can have a significant negative impact on your overall long-term investment return and ability to achieve your retirement goals. 

Hold a diversified portfolio

Diversifying your investments is key to reducing risk and helping cushion the impact of market falls. Holding a variety of well diversified investments can also help lower the emotional impact if one of those investments gets into trouble. When emotions like fear take over, it’s easy to make decisions we may later regret.

Over time, shares can offer the most potential to increase in value. But shares also have more short-term risk. For most people they’re not the only asset class you’ll want to hold. In order to create a portfolio with more stable returns, you’ll want to expose yourself to more than one asset class because you cannot predict which one will do best in any given year. Many people also invest in bonds which are typically less volatile but offer potential for returns, or other assets like cash, government bonds or money market instruments which offer lower volatility but also have lower returns. You can read more about the current low-rate environment and implications for returns on cash and bond in our fixed income blog.

At Aware Super, we believe that a well-diversified portfolio can help reduce overall risk in a portfolio and provide sufficient growth to generate returns over and above cost of living rises (inflation) so you can meet your retirement objectives. Determining the exact asset allocation that’s right for you will depend on your personal circumstance including your age and how much risk you’re able to take.

To make this assessment easier, members can select our default MySuper Lifecycle approach, which uses a blend of our diversified funds to manage risk over time. Alternatively, for those members that prefer to do it themselves, we offer a mix of different diversified or single asset class investments to suit their specific circumstances.

No matter which approach you adopt, having a sound investment plan will help you focus on the long term.

Review your investment plan regularly and stick to it 

If you have an investment plan, that’s half the battle. The important part is to remember to review your plan, update it, and stick to it. Even if you’re close to or in retirement, it’s still likely that you will have a reasonably long investment horizon. Sticking with your longer-term investment strategy and focusing on your progress towards your longer-term goals will make it much easier to deal with periods of market volatility. 

As you reach retirement, it’s also a good time to reassess your overall priorities and goals. Again, consulting with a financial planner or other investment professional can help you see things objectively and help you reach an informed decision. 

What if I still have more questions?

For further information on our advice options, talk to one of our financial planners who will assess your situation to determine if your strategy needs adjusting.

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