Market crash: Super change you should avoid
PANICKED investors spooked by the stock market meltdown are switching their super into cash despite warnings they are inflicting financial "self harm" on themselves.
Australians have been told not to panic about short-term losses on their superannuation accounts even as markets continue to suffer from coronavirus panic.
Queensland-based pension giant Sunsuper reported an increase in its members unwisely moving into cash rather than stocks and other investments, a move described as akin to selling your house during a property market crash.
The average balanced super fund has lost about 5 1/2 per cent since the end of January, equivalent to $5500 on super savings of around $100,000.
Chant West investment research manager Mano Mohankumar said people had to realise that while super accounts fluctuated from time to time they remained solid investments. The benchmark ASX 200 closed more than 7 per cent lower on Monday after losing almost 14 per cent in the two previous weeks.
"It is too early to say what the impact of the coronavirus will be but we would say superannuation is a long-term investment," said Mr Mohankumar.
"In the greater scheme of things super is not down by much especially when you consider the stellar returns since the end of the Global Financial Crisis."
The average balanced fund had achieved annual returns of 7.9 per cent over the past decade. Mr Mohankumar said most Australians also had their super in a variety of assets, with stocks accounting for about half of the average growth fund. "Superannuation also is invested in property, infrastructure and private equity," he said.
Sunsuper head of advice and retirements Anne Fuchs said the number of members moving into cash in response to the market slide was higher than she was comfortable with.
Ms Fuchs said unless people were within five years of retiring they should not be changing their investment strategy.
"It really is a form of financial self harm," said Ms Fuchs said. "After your house, your super is your biggest asset. But would you be selling your house during a property crash?"
She said people were now more aware of their super savings but had to realise they were a long-term investment. "People can easily check their account online and switch asset classes but checking the value of their account every day is not healthy behaviour," she said.
She said people five years away from retiring should be seeking financial advice about perhaps moving to a more conservative investment strategy.
QSuper chief investment officer Charles Woodhouse said that since the Global Financial Crisis QSuper had adopted an investment strategy that sought to minimise exposure to volatility.
Mr Woodhouse said the $80 billion fund had large investments in bonds that were performing well because they were seen as a safe harbour during difficult times. It also had substantial investments in infrastructure and property.
"We certainly did not predict the coronavirus but we realise that the market does go through periods of volatility," said Mr Woodhouse. "We can't totally insulate our members from volatility but we have a strategy that is more robust."
He said while there had been some switching to cash it was not substantial and most members realised that the fund had a long-term strategy to protect investments.