The economic impact of COVID-19 has everybody whispering the S word—super. Your superannuation is partly invested in the share market, which means when markets decline, so can the value of your superfund.
But what’s really the deal for young Aussies right now? Should we be worried about our super balance dropping faster than our respect for the Honey Badger during his stint on The Bachelor? Here’s what you need to do to become a Coronavirus super trouper.
Check Your Balance—But Don’t Panic
Now is a really great time to get to know your super. For some of us, it’s the first time we’ve experienced a major hit, and learning from this experience can help you in the future.
Check your balance every so often, and pay attention to when—and how steeply—things are declining. That said, don’t get too obsessed. Much of the world has had to shut down or scale back, which means you will see a decline in your super balance. It’s normal, relax. Remember, young people in their 20s and 30s have 30-45 years left before they’ll need to access their super in retirement, which leaves plenty of time for markets to recover. Money expert and host of the My Millennial Money podcast Glen James explains, “Growth portfolios have around a 6-7 year suggested hold time, so this fits in fine with a 30 year window!”
Get To Know How Your Super Is Invested
Don’t panic that share values are plummeting. In fact, only about half of your super is held in shares—especially if you’re young. Older Aussies will likely have even less—between 20%-30% invested in shares, depending on their fund and strategy.
Take this opportunity to log into your superfund dashboard and explore your investment allocation. When markets begin to recover, you’ll be able to quantify where your money was invested and how the global crisis impacted on your balance.
Get Comfy And Ride It Out
Seeing your super balance dropping is freaky—we get it. But panic-switching your investments can mean you lose out by cashing out your existing shares at the pit of the market. Glen added, “It's important to note that market downturns can be the worst time to sell out of your super or move to a more conservative portfolio.” If you switch your super to ultra-conservative allocations like cash and bonds, you miss out on the value surge that comes from market recovery, and solidify your losses by pulling your money out of the share market when it’s already dropped in value.
Ultimately, your super is your decision. But right now, the best tip you’ll find is to leave your super well alone. Declining markets are actually an important part of long term investment strategies. By continuing to invest through adversity in the share market, you’re able to access units at a lower cost, and allow that value to recover over time. There’s no way to guarantee the future of the market, but historical performance proves that markets do recover. Glen concluded, “Most people don't move a tree around their garden once it's planted, so let your super do it's thing—grow!”
If you’re in your 20s, 30s or even early 40s, the consensus from financial experts is to ‘super distance’ as well as social distance!
Phew! Now your brain is freed from super anxiety, fill that headspace with these epic out-of-the-box online courses to get you through isolation.
Emma is a finance blogger at The Broke Generation and a reformed spendaholic. She shares hot tips on saving, property, tax, career and investing for millennials who want to break the spending cycle and get financially confident.
Image Credit: Mark Adriane