Explaining the current share market ups and downs

10/08/2011
Provided by Mercer. The information in this article does not necessarily reflect the views of the Trustee.

Why are the markets so volatile at the moment?

Over the past few days share markets around the world have fallen significantly, followed by some gains during the day, only to drop again, often in that same day.

These extreme ups and downs (called market volatility) are a result of ongoing concerns about the possibility of a recession brought about by the huge size of US and European government debt.

How will this affect you?

Most superannuation investors have exposure to the share market to varying degrees and therefore will be affected by these market movements. The coming weeks may continue to be quite volatile and difficult to predict.

While it's natural to be worried about what's happening now to your superannuation and investments, you also need to stay focused on your long term goals for your superannuation. Superannuation is generally a long-term investment, and that means your account will be affected over time by periods of market volatility.

As we saw through the last global financial crisis in 2008-2009, share markets do recover. Shares have traditionally proven to be a good long-term investment and have a legitimate place in most long-term diversified superannuation investment portfolios.

To get a clearer understanding, look at your performance over a longer term period, say 5 or 10 years.

What should you be doing?

Most superannuation investors generally have a long time frame ahead of them.

Here are some things you can do:

  1. If you're interested in learning more, read the latest investment commentary on your Fund's website
  2. Contact your Fund Helpline if you really are worried or if you want an explanation of your particular investment strategy.
  3. You should seek professional advice from a qualified financial adviser before making any important decisions.


Remember: your superannuation is generally invested for the long-term so watching short term movements is may not give you a true reflection of investment performance.

If you switch investments now you run the risk of:

  • Chasing returns, which may not be productive because you might sell at the lowest point in the share market cycle, and buy when the markets are at their highest point.
  • Missing out. In times of volatility, the market can recover very quickly and you can miss these gains when the share markets return again because you might be invested in cash for example.


What does this mean for your super?

We recommend you look at five and ten-year returns if you have a long term investment timeframe to get a real sense of how your super is tracking. Investment markets have historically moved in cycles and while returns will vary from year to year, super is generally an investment for the long-term.

Superannuation is also taxed at lower rates than non-super investments, so it's important to look at the additional benefits paying less tax can bring you over the long term.

And always remember that your Fund is here to help you. Give us a call or visit our website for more information.

 

This information has been prepared by Mercer Outsourcing (Australia) Pty Ltd (MOAPL) ABN 83 068 908 912, Australian Financial Services Licence #411980. Any advice contained in this document is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this document, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek professional advice from a licensed, or appropriately authorised, financial adviser if you are unsure of what action to take. "MERCER" is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2012 Mercer LLC. All rights reserved.
 

SA Metropolitan Fire Service Superannuation Pty Ltd ACN 068 821 750 as Trustee for the SA Metropolitan Fire Service Superannuation Scheme ABN 99 439 309 855.

This website is provided by Mercer Outsourcing (Australia) Pty Ltd (MOAPL) ABN 83 068 908 912, Australian Financial Services Licence #411980. The Trustee pays a fee for the provision of this service, however this fee is not conditional on you using this service or acting on the information or advice provided through this service.