Investments continue to go up and down

We chatted to our Head of Investment Strategy, Michael McQueen, about recent volatility and what it all means for you.



What is volatility?

Volatility is simply the ups and downs of investing. The more the price of an investment fluctuates over a given period, the more volatile it’s considered. Investment markets always move in cycles, so in a sense there’s always some level of volatility in investing.

What’s causing current volatility in investment markets?

We believe the key driver is the reduction in liquidity (the supply of money) globally, driven by central banks increasing interest
rates (the cost of money) and reducing the size of their balance sheets. Drivers of volatility in the short term include trade tensions between the US and China and a slowdown in economic activity over the last few months.

How long will this volatility last?

That’s a bit like asking “how long is a piece of string?” No one really knows how long this instability will continue and we do not invest your retirement savings on a month-to-month basis. What we do know is that investments always go in cycles and for every downturn, there’s an inevitable rebound. Large downturns are usually preceded by irrational behaviour and corporate activity, whereas smaller, quicker downturns, like the one we experienced in December, are harder to justify in hindsight. It’s also worth remembering that we’ve been lucky to experience much lower levels of volatility than normal in the last seven years (until 2018), with share markets generally consistently going up around the world. So, to some extent, the recent volatility is a ‘return to normal’. We’ve developed an investment strategy that seeks to balance both risk and return to maximise the long-term returns of your super regardless of market volatility.

Michael's tips for dealing with investment volatility

1. Talk to us

We provide financial advice at no extra cost for members, where advice is related to your super or pension. You can call us on 1300 130 780.

2. Stay up-to-date

Our monthly and quarterly market snapshots are available on our website. They provide updates on financial markets that drive the performance of our investment options.

3. Don't react to the hype

Quite often, by the time an event in financial markets reaches the TV or the front page, it’s too late to react.

4. Diversify

Don’t put all your eggs in one basket. Many of our investment options (including our MySuper Balanced option) are diversified, meaning they invest in a range of asset classes. If one asset is performing poorly, another may be performing well, so having a mix of assets can minimise the effect of volatility.

5. Think long-term

At times returns will be high and at other times they will be low (sometimes even negative). This is normal and over the long term, growth assets (like shares) significantly outperform defensive assets (like cash).

6. Don’t chase last year’s ‘winners’

We know some of our members like to switch into last year’s top performing investment option. Unfortunately, this is usually not next year’s top performing option. Speak to one of our advice team on 1300 130 780 before choosing an investment option that’s right for you.

7. Keep calm

As with anything, remember, this too shall pass. Investments come in cycles and learning to ride the waves is important.

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