Many people are worried about their superannuation and investments. Logging in to accounts and seeing at least 10% gone from their balance in just a couple of weeks is confronting.
For some people this could be $10,000, $50,000 or even $100,000 or more. This first and most important thing? Don’t panic and make a drastic change.
During the Global Financial Crisis, we saw markets fall over 50%. Many superannuation balances fell 20-30% over that time. Those who didn’t panic and left it as is enjoyed significant growth on their investments and superannuation balance over the next 10 plus years.
Those who panicked during the GFC and sold their investments or switched to the conservative or cash option, missed out on so much of that recovery. The statistics and data show us that on the whole, those who make changes will be worse off. So, what else can you do?
You should review your superannuation or investments and make sure they are low cost, the higher the fees that are being deducted during this time, the less that remains invested for the eventual recovery. This also extends to your insurance premiums that might be deducted from your superannuation – perhaps see if you can reduce the cost of your insurances or pay for them directly.
You could also look at this from a positive angle – after every market crash comes some form of recovery. You could look to benefit from this. That could mean making additional contributions to your investments or superannuation while the prices are down. When asset prices fall, expected returns increase. This suggests you will experience even better growth as we see the recovery. For the bold, look to switch to a more aggressive investment option during this time. Some people might even take this opportunity to start an investment portfolio. This will require access to cash or the ability to secure an investment loan. The benefit will be an investment journey that begins after prices have been discounted.
This year is going to be a challenge for many people for various reasons. Most importantly take care of yourselves and those around you. Try your best to stay healthy. Times will get better and we will revert to normal life. Keep longer term goals in focus. It’s important to not let the current events distract us from our longer-term financial planning strategies.
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