On Monday, superannuation members across Australia experienced significant declines in their balances as the ASX 200 index dropped by more than 6%.
The market’s volatility, driven by a mix of global factors including tariffs, led to a temporary setback in super funds. Despite the sharp fluctuations, experts advise against panic.
According to News.au, they emphasize that staying the course with a long-term investment strategy remains crucial for most superannuation members, particularly those not nearing retirement.
The Impact of Market Volatility on Superannuation Balances
As the ASX 200 plunged by 461.40 points or 6.02% early Monday, superannuation balances, particularly for those in higher-risk investment options, were notably affected. For members with large balances or those exposed to both Australian and international shares, the losses were significant.
However, the market showed signs of recovery by the afternoon, with the index bouncing back by 2pm, though still down 313.20 points or 4.08%.
It’s certainly bad news for those closer to retirement or in retirement,
AMP chief economist Shane Oliver told NewsWire. For those with years before retirement, however, he emphasized that this market slump could present an opportunity.
But I think for most superannuation members with years to go before they retire, it is not necessarily a bad thing as their salary deduction that occurs every month will be invested in shares at a cheaper price – Oliver explained.
I think, for an ordinary superannuation member who’s got 10 years plus to go, it’s not a big event – he said.
These things happen every so often. Only three years ago, 2022 the Aussie share market fell 16 per cent.
Expert Advice : Stay Invested for the Long Term
Economists, including Oliver, caution against making rash decisions based on short-term market fluctuations. Oliver noted that while the decline is concerning for those nearing or in retirement, it presents an opportunity for younger super members to invest at lower prices.
The worst thing to do in times like these is to react to day-to-day market movements by panicking and shifting your investment options during fluctuations without financial advice,
Ben Styles, co-founder of SuperAPI, advised. He emphasized the importance of seeking financial advice before making any changes, particularly in times of market uncertainty.
Older Members: Proceed With Caution
For those in their 50s and 60s, market volatility can seem more pressing. Ben Styles also highlighted the risks of reacting impulsively to short-term fluctuations.
His advice was clear: make sure any decision regarding your superannuation is based on financial goals, not panic. Despite the recent market turbulence, industry experts suggest that a long-term view is key.
The Australian Superannuation Funds Association (ASFA) noted that, on average, superannuation funds yield a 7.5% return per year over a 25-year investment period, significantly outpacing inflation.
Our research shows funds on average return 7.5 per cent a year over a 25+ year investment, which is around 5 per cent higher than average inflation – ASFA stated.
ASFA also stressed that short-term market movements should not prompt hasty investment changes.
Each individual fund member needs to make decisions based on their financial goals and risk tolerance, however making changes to investment allocation based on short-term fluctuations risks locking in losses – a spokesperson said.
The Broader Economic Context
While Australia’s direct exposure to global tariffs remains minimal, the overall effect on the market is significant due to the country’s high exposure to Asia.
Paul Bloxham, chief economist at HSBC, explained that this global shock is affecting local household wealth, including superannuation savings.
The effect of the global shock is also already impacting local household wealth through a high exposure to global equities via households’ superannuation savings – he said.
Despite these challenges, experts encourage investors to stay focused on the long-term outlook.
We’re seeing a considerable impact, negative impact on the stock market that impacts Australians because superannuation funds have their shares there – Prime Minister Anthony Albanese said
acknowledging the effects of the market downturn. However, he reiterated that investors should avoid rash decisions based on short-term market moves.
