|First published: March 18|
Although markets were struggling at the close of last year, the first two months of 2019 have signalled a positive change for relieved investors.
Global and Australian equity markets are up again after 2018 saw the world’s worst year for share markets since the global financial crisis.
When the markets dropped dramatically in December 2018, many spooked investors converted their shares into cash.
Now that the market is recovering, we estimate that members who cashed out late last year may have lost up to $2,5751.
While decisions based on the short-term may feel like the safer option at the time, they are often unwise in the long-term.
On top of this, these investors have lost out on a higher return over time, and do not have the opportunity to take advantage of long-term growth.
For LGIAsuper, these events demonstrate the importance of our long-term approach to investment, which is based on the knowledge that, despite rapid short-term fluctuations in the market, returns are made over time.
LGIAsuper Head of Investment Guy Rundle said not to panic when faced with volatile markets.
“There will be ups and downs in the market, but superannuation is a long-term investment and our strategy is designed to weather periods of volatility to grow investment over time,” Mr Rundle said.
“As an indication of these snap changes, January has been a positive month around the world, despite last year’s difficulties.
“Australian shares increased by 3.9% and global equity markets were up 4.1% in January, with the United States leading the market.
“In February, we saw Australian shares rise by 6.0% and global equity markets increased by 5.1%.
“LGIAsuper’s investment portfolio is tilted towards the global market, meaning that members are set to gain from the high performance in the USA. For example, our MySuper Lifecycle Under 75 option recorded a gain of 2.8% over the month of January, and a gain of 2.6% in February, after a loss of 2.1% in December 2018.”
Even though January and February yielded good results, Mr Rundle has urged investors to remember how quickly the markets can change.
“Given the instability of global trade issues, the upcoming federal election and consumer markets, Australia will likely face more fluctuation in the ASX in coming months,” Mr Rundle said.
“Just as we encourage investors not to act on short-term lows, the same applies to short-term highs.
“Choosing an investment portfolio that suits your personal situation is what you should be focusing on. If you won’t be accessing your super for many years, a higher growth strategy will be more likely to provide greater return by the time you need your super.
“If you are close to accessing your super, a defensive strategy will ensure that you are protected from volatility in the market that may affect your investments in the near future.”
To find out what type of investment suits you, use our online risk profiler tool or call us today on 1800 444 396. Our team will be happy to provide advice on investment strategies and help you make the best decision for your personal situation.
1 Estimated loss based on a $50,000 account balance invested in the LGIAsuper MySuper Lifecycle Under 75 investment option relative to the Cash investment option for the month of January and February 2019.