When it comes to money, we understand that market volatility can be a concern, and it’s natural to worry when the market is going down.
Super is a long-term investment. So, rest assured that you have a robust long-term investment strategy designed to deliver strong long-term returns and to anticipate the inevitable ups and downs of the market when they occur.
Focus on the long game
All types of investments are subject to risk and market volatility can occur when investors are sensitive to changes in the economic, political and corporate environment. Investment markets don’t like uncertainty and can overreact to events that cloud the day.
It can be unsettling when you notice low or negative returns from your super. However, it’s vital to remember that super is a long-term investment; when viewed that way, periods of low or negative returns become less significant. History teaches us that markets eventually recover, and you will also recoup part of your losses.
In fact, market declines are common in thriving, functional markets. There will be phases of growth that include slowing down and accelerating. No investor can accurately forecast when each of these events will occur. It’s crucial to keep in mind not to panic, to concentrate on the long game, and to avoid becoming sidetracked by short-term occurrences, even though sudden market changes may cause you to doubt your investing strategy.
Hold a diversified portfolio
You can smooth out returns over time by diversifying the assets in which your super is invested.
Shares have the greatest potential for value growth, but they also carry the greatest risk in the short term. You should expose yourself to multiple asset classes in order to build a portfolio with more steady returns because you cannot forecast which one will perform best at any given time. Many people also invest in alternative assets including cash, government bonds, or money market instruments, but they can have lower returns, as well as bonds, which are often less volatile yet offer the possibility of rewards. Unlisted assets, such as those in real estate, infrastructure, and private equity, can also be crucial components of a diversified portfolio because they frequently offer long-term returns that are comparatively steady.
While it’s natural to want to protect your portfolio after a market decline by switching to cash, it also raises the question of when to get back in.
In order to achieve your retirement goals, a well-diversified portfolio can assist lower overall risk and offer enough growth to produce returns over and above the cost of living increases (inflation) over the long run.
Your unique circumstances, including your age and your capacity for risk, will determine the best investment mix for you.