Let’s face it, COVID-19 has made an extremely significant impact on pretty much everyone and everything. Share markets all around the world have lost a critical amount of their capital value while assessing and digesting the effects of COVID-19 on global economies.

If your super fund is invested in shares, your account balance would have fallen over the past few weeks. The average Australian ‘balanced’ super fund option consists of approximately 60% shares, which is a large percentage. In the past four weeks, the ASX200 has gone down by around 33.5% (as at 19/03/2020).

Investing in shares comes with risks. Historically the probability of a negative return in any one year is 25% (or 1 in every 4 years), so this is nothing new for us.  

We’ve basically seen a 12-year bull (rising) market since the last significant downturn in 2008 (from the GFC).  

Yes, the fall in the market and your account balance will look quite scary, however it's important to understand these downturns are never permanent.

The share market moves in cycles with periods of markets going up, followed by times where markets go down.  There have been eight market downturns in the past 47 years and all of these have been followed by periods of strong market returns.

It’s important to assess the market impact in light of your current situation.  For example, if you’re under 50 years old and not looking to retire in the next few years, it’s a matter of holding tight and riding out the storm. Take a long-term view of the current falls, as history shows us that however far the current market drops, it always rises above the lowest point at some time in the future.  We just don’t know whether this will take 12 months or 5 years.

Super is a long-term investment – most of us can’t touch our super until we are 60 years old.  Taking a short-term approach and reacting to the current falls could be detrimental to your financial situation so aim to hold on and ride it out if you have the time. If you’re still working and don’t intend to withdraw your super any time soon, there should be no reason to panic.

If you’re considering making changes to your Investment Option (or asset allocation, being the % of your account balance invested in shares) this is a very important decision and you should always consider it in light of these factors:

• your age and years left in the workforce
• your comfort (or uncomfort) level to risk and market fluctuations 
• your long-term goals

Before you take action, it’s important to get advice or research and understand the impacts of making a change to how your super is invested.  When investors sell out of falling growth assets and move to cash, this can be very detrimental as it ‘locks in’ losses.  Staying invested means you’ll get the financial rewards when the markets go back up.

If, however, you’re not comfortable with your super fund balance falling and you are close to retirement, it would be a good idea to get advice.

In closing, in these uncertain times with our emotional and mental energy pulled in so many directions, it is important we stay grounded, rational and mindful of our thoughts and actions.