Movements in share markets can make us feel concerned about how this might affect the value of our superannuation. The recent falls in the US and subsequently Australian share markets are an example of this.

Shares in the US have fallen by 9% recently as a reaction to the release of annual wages growth figures, increasing concerns about higher inflation that may prompt the US Federal Reserve to raise interest rates more than currently anticipated. However, company earnings have been growing strongly, and with consumer and business sentiment improving, expectations are for a continuation of stronger economic growth, which remains the most likely outcome at this point.

Market volatility has been low for some time so it is easy for investors to forget that returns can be unpredictable. It’s quite normal for equity markets to fall by 10% to 15% during the cycle, so this recent sell-off can be put into this category given other indicators suggest the economy and financial conditions remain supportive for asset prices. Returns when measured over the long-term are likely to be positive, but possibly much lower than investors have experienced in recent years.

Super SA’s investment manager, Funds SA, constantly monitors and reviews the appropriateness of the investment strategies and managers. Changes to the strategy are made to achieve the best outcome for members.


Investment options remain well diversified

Notwithstanding this short-term volatility, members’ investment options remain well diversified, as it has been a strategic objective to build portfolios that have less exposure to share markets to help safely navigate through such turbulent times. Although portfolios are not immune to the volatility stemming from share markets, Super SA’s asset mix, including high quality bonds, property, private equity and other unlisted assets, have helped to lessen the gyrations and deliver a smoother return profile for members.

Focus on the longer term

Whilst it is necessary to remind members that investment returns can be volatile in the short-term, an important discipline is to remain focussed on the long-term.

The best long run guide to the investment outcomes of the Super SA options is their investment objectives. For example, the Balanced option is targeting a return averaging 3.5% above the inflation rate when measured over longterm periods (of at least 7 years).

Superannuation remains a long-term strategy but with a well-diversified portfolio, investment goals may be achieved with greater certainty.

 

This article is current at 12 February 2018, and prepared by Super SA's investment manager, Funds SA.

 

Funds SA Disclaimer

The information within this article has been prepared in good faith by Funds SA. However, Funds SA does not warrant the accuracy of the information and to the extent permitted by law, disclaims responsibility for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly through relying upon it whether that loss or damage is caused by any fault or negligence of Funds SA or otherwise. The information is not intended to constitute advice and persons should seek professional advice before relying on the information.