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Considerations for market volatility when growing wealth

Being more engaged with one’s superannuation investments could help members to make the most of the time they have to grow wealth for retirement – no matter the state of markets.

It’s natural to feel concern when financial markets experience unprecedented volatility – particularly when it comes to superannuation. After all, the money you save during your working life could have an impact on the long-term value of your super fund and your lifestyle in retirement.

 

 

Recent developments may have made you more engaged with your super fund than ever before – leading you to wonder what you could be doing for your investments at this time. When markets become volatile, is there anything you can do to help you make the most of your wealth-creation journey? Below, we offer some helpful considerations to keep in mind.

 

 

It’s important to remember that superannuation is one of the biggest (and longest-term) investments you’ll ever make – meaning, it can require a long-term view. Depending on your life stage, it can be helpful to remember that with years of wealth accumulation ahead, you’ll likely have time to ride out changeable market conditions to generate investment returns over the long term.

 

 

It’s worth noting that markets regularly experience volatility for various reasons. The Coronavirus pandemic is also a factor, but one that will likely pass in time. History shows us that markets do recover from disruptive influences – for example, the Global Financial Crisis. In the decade following the crisis, global share markets recovered and delivered returns of roughly 10% to investors. 

 

 

Last year, markets also experienced volatility due largely to geopolitical influences. However, investors in share markets were rewarded over the year when markets stabilised – with Australian and global shares delivering exceptionally strong returns of 24% and 27% respectively. Market volatility can therefore present investors with investment opportunities when maintaining a long-term view of investing. For example, buying into share markets when they’re down (and cheaper) could mean the value of those investments rises when markets recover over time. But this doesn’t mean you should buy anything and everything that’s on sale. For example, a company’s share price may be falling because of other factors (for example, a management change or a legal case) that could erode its long-term potential. It’s important to consider these factors and to be confident that a company’s value will rise in the future.

 

 

At the same time, it can still be sensible to continue budgeting and saving for a rainy day – particularly in the current environment, where regular day-to-day life may be disrupted. Having a separate savings fund could offer some peace of mind in uncertain times, especially for members whose daily lives may be impacted by ongoing economic developments as a result of the Coronavirus – for example, if businesses are required to temporarily close down and employees are sent home to accommodate the Government’s social distancing measures.

 

 

But while financial markets regularly experience fluctuations and while investing for super can therefore require a long-term view, remember: super is not a set-and-forget scheme. Retirement may feel like a long time away if you’re navigating and building your finances. However, being more engaged with your fund now – even in simple ways, such as regularly reading fund updates, staying up to date on the latest market developments, or regularly reviewing your super fund to ensure it aligns with your unique risk profile and financial objectives as your personal circumstances change – could be helpful later on in life when you do reach retirement.

Government Support

If you have experienced disruptions to your employment, you may also be eligible to access some of your superannuation savings early. The Australian Government announced that eligible members may be able to access up to $10,000 until 30 June 2020, and then a further sum of up to $10,000 from 1 July 2020 for approximately three months. Eligible members will be able to apply through the myGov website from mid-April 2020. You can learn more about these support measures online.

Need help?

The Colonial First State Investments team is working hard to make sure you have the support you need. You can expect that as developments continue to unfold, we will continue closely monitoring markets, sharing regular market updates, and communicating closely with our network of experienced investment managers to skilfully identify the risks and opportunities in investing.

 

 

As you keep your long-term goals top of mind, remember: our team is here to help – with news, insights and helpful resources available on our website to help keep you up to date on the latest.

Disclaimer

This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State). The information, opinions, and commentary contained in this document have been sourced from Global Markets Research, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. Global Markets Research has given Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) its permission to reproduce its information, opinions, and commentary contained in this document and for Colonial First State to authorise third parties to reproduce this document. This document has been prepared for general information purposes only and is intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are the views of Colonial First State at the time of writing and may change over time. This document does not constitute an offer, invitation, investment recommendation or inducement to acquire, hold, vary, or dispose of any financial products. Colonial First State is a wholly owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124, AFS Licence 234945 (the Bank). Colonial First State is the issuer of super, pension and investment products. The Bank and its subsidiaries do not guarantee the performance of Colonial First State’s products or the repayment of capital for investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from colonialfirststate.com.au or by calling us on 13 13 36. Past performance is no indication of future performance. Stocks mentioned are for illustrative purposes only and are not recommendations to you to buy sell or hold these stocks. This document cannot be used or copied in whole or part without Colonial First State’s express written consent. Copyright © Commonwealth Bank of Australia 2019