Is Australia’s relationship with shares on the rocks?
17 July 2012 | By James O'Leary | Club Plus Super
The media is full of sensational stories about market volatility and economic gloom, almost as if this is the first time markets have performed poorly. Historically, share markets have always fluctuated between periods of positive and negative returns, so what’s the big deal this time around?
History of ups and downs
Since the end of World War II, global share markets have trodden a rocky road of peaks and troughs. Over that period, however, the overall trend has been one of growth, with each trough usually followed by a period of strong growth outstripping previous peaks. Banking on this pattern, savvy investors and advisers have taken advantage of ‘bad times’, continuing to invest and building their share holdings at discounted prices – a strategy known as ‘dollar-cost averaging’.
This time is different?
This most recent period of negative returns shows some characteristics not seen before. The main source of concern for investors is the protracted nature of this phase; based on previous cycles, we ‘should’ be in a strong recovery by now. The reasons for this are varied and complex, with roots entangled in financial and geopolitical spheres – but the point is that even savvy investors are losing their nerve.
What about my super or pension?
If you have super or an allocated pension, it’s likely to have some level of investment in the share market. Likewise, you will have either nominated, or defaulted into, an investment option (or combination of investment options) offered by your provider. Investment options have varying exposure to different asset classes, depending on their investment objective. Options with more aggressive growth targets generally have higher exposure to share markets, while those aiming for lower yet steady growth are usually invested in cash.
What’s an investor to do?
For long term investors who can wait for markets to recover, periods of negative return offer opportunities in the form of discounted shares. On the other hand, people who can’t afford to wait for an upturn may choose to move to more stable investments, like cash and term deposits.
If you’re concerned about how your super or pension is invested, it’s best to see your financial adviser as they can consider all the factors relevant to you.
Comprehensive super and pension providers will offer investment options to suit all ages and market cycles, ranging from ones invested only in cash to others with high exposure to international shares. As an investor, you can think of these options as a toolkit, each with specific functions and performances. While your provider can offer the tools, they can’t tell you which one you should use – that’s up to you. That’s why reputable providers offer access to financial advice, ensuring their investors have support to find the best options for them.
Ride the waves with Club Plus Super
Club Plus Super offers a comprehensive range of investment options to suit all needs and market cycles. Completing our investment toolkit, we recently launched Term Deposit options in super and pensions to help our members lock in competitive returns over 3,6,9, or 12 month periods. Combined with our financial advice service, you can be confident your investment’s in good hands.
For more information about our range of investment options, including term deposits, call us on 1800 680 627. For advice, and to discuss your investment options, make an appointment with a Club Plus Financial Planning adviser.
The information contained in this article is general information only and does not take into account your individual investment objectives, financial circumstances or needs. You should not rely on this information as a substitute for professional advice.
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