First published: 4 January 2019
Whether you hold firm to, or deviate from, your strategy in periods of turbulence can be critical to how your superannuation performs in the long-term.
LGIAsuper Head of Investment Guy Rundle said members should avoid making snap, short-term changes that could severely impact the long-term performance of their investments and should instead make a considered decision about their long-term objectives.
"It is the nature of markets to move up and down, but 2019 looks like it could be particularly volatile," Mr Rundle said.
"At times like these you need a clear investment strategy and to stick to your guns. This is very important when it comes to superannuation.
"If you have determined that you have a balanced approach to risk, it's unadvisable to switch to a cash or low-risk investment option during a volatile period. This is because while protecting yourself on the 'downside', you also eliminate the prospect of generating a significant return on the 'upside' when the markets rebound."
Mr Rundle said it was important for members to regularly review their risk appetite and ensure that their funds were in the correct investment option for their risk appetite and life stage.
LGIAsuper has five ready-made investment options ranging from aggressive to defensive and sets performance objectives over five years for each of these options. These options are diversified across a mix of asset classes and each is designed to suit a particular type of investor. Diversification reduces the exposure to any one particular asset or risk. Exposure across different assets can help reduce the volatility of any one particular asset class on your super savings.
"The investment strategy underpinning LGIAsuper's ready-made options is designed to deliver the performance outlined in the objectives and to minimise the effects of volatile markets," he said.
"The level of volatility we have experienced in the past year is far from the extremes of the Global Financial Crisis as the chart below indicates, but there is growing uncertainty in financial markets and we are seeing the influence of that across all the major market indices."
Some of the big issues currently causing concern include:
At LGIAsuper, we understand how world events can impact your super savings. If you have concerns, our Advice team can guide you through our investment strategies and help you make the best decision for your personal situation.
Find out what type of investor you are by using our risk profiler tool or call us today on 1800 444 396.
Caption: The S&P/ASX 200 VIX (A-VIX) is a real-time volatility index that provides an insight into investor sentiment and expected levels of market volatility. The index tracks S&P/ASX 200 index option prices as a means of monitoring anticipated levels of near-term volatility in the Australian equity market. To find out more, visit the ASX website.