Investing in volatile markets

While volatility in the markets can be unsettling, it’s important not to panic. It is the nature of markets to move up and down over the short term. Long-term investment goals can be impacted when decisions are based on short-term market movements.

All financial markets exhibit some degree of risk, however some asset classes are more exposed to risk than others and can be affected by market volatility. 

At LGIAsuper we continue to review all our portfolio holdings to ensure our exposures are the right ones for the long term. Our investment strategy has been positioned to minimise the effects of volatile markets on your super.

Here are our tips for investing in volatile markets.

Diversification is key

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.

LGIAsuper’s ready-made investment options (including our default investment option for Accumulation accounts, MySuper Lifecycle) are highly diversified, with allocations to global and domestic sharemarkets, infrastructure, property, fixed income, cash and alternative investments. Sharemarket movements impact only part of the overall returns of LGIAsuper's default investment options. This means a fall in one asset class may be offset by better performance from another asset less prone to volatile movements. And within asset classes, we diversify even further by spreading investments across different investment managers and strategies, as well as different industries and sectors. 

Consider your investment timeframes

Every financial investment carries with it an element of risk. When making investment decisions, it's important to consider the timeframe over which the investment will be made, as well as your own personal set of circumstances. Your investment timeframe impacts the expectation of return or reward of the investment decision as well as the level of risk that can be tolerated.

Superannuation is generally a long-term investment, intended to support your income in retirement. If you are planning to access your super in the short term, your investment timeframe will be reduced for the portion of super you intend to draw which may influence your investment decisions. 

Threat or opportunity?

It is important to remember that shares are a long-term investment. The best days in the market often closely follow the worst ones and switching out of panic could impact the opportunity to benefit from a market improvement.

Markets periodically go through volatile cycles, both positive and negative, and it is very difficult to determine when these cycles will come to an end. There is a higher likelihood of achieving long-term financial goals by remaining on course and invested in options that are appropriate for your stage in the investment lifecycle and your own set of risk preferences.

Stay informed

Each week we share an economic and market update from QIC so you can keep up to speed on events that could impact your super investment.

Read each week's market update here.


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