Update 19 May 2020
It can be tempting to switch investment options when markets are volatile. But should you?
Generally, members who don’t switch through market ups and downs are better off than those who do change investment options.
Some people see the market fall and decide to change investment options – some members did this during the global financial crisis (GFC).
How switching can cost members thousands
During the GFC some members switched to a conservative option like Cash. But some of these members were slow to switch back in as share markets began to go up again – so not only did they lock in losses by selling when markets were down, in some cases they also missed out on a ten year run of strong returns after the markets recovered. While the market experiences lows regularly and recovers, the only exception was during the Great Depression which took several years for the markets to bounce back.
To show how switching can affect your long-term returns, we have modelled outcomes for three example members, who all started with $70,000 in their super account on 1 July 1999, before the-GFC.
Libby stayed in the Balanced growth option, which is a diversified option with a mix of growth and defensive assets. Although Libby’s account balance went down during the GFC, because she stayed in the Balanced growth option Libby benefited from the rebound in returns when the markets went back up. Her projected balance at 30 June 2020 is $680,000.
Joe switched out of the Balanced growth option into the Cash option during the GFC, and he didn’t switch back when markets started to grow again. He now has around $200,000 less than Libby, because she stayed in the Balanced growth option. Joe’s projected balance is $480,000 at 30 June 2020.
Darren was invested in the Cash option the whole time. Although Darren didn’t see his account balance drop during the GFC, he has also seen much lower long-term returns. His projected balance is $490,000 at 30 June 2020.
Past performance is not a reliable indicator of future performance
Why it can pay to leave the decisions to the experts
Vision Super offers a range of pre-mixed options that range from growth to more conservative options. So, if you are invested in one of these options, you don’t need to worry about monitoring markets and managing your investment choices because we do it for you.
Our Investment team is constantly monitoring a range of indicators looking for changes in the investment outlook, and adjusts the allocation to different assets to make the most of the current and future environment and maximise your long-term returns.
We understand that everyone’s needs and situations are different, so if you’re worried about current market conditions here are a few steps for you to consider:
- Have a look at the relevant PDS and the How we invest your money guide to find out more about your investment options
- Log in to your Vision Super account or our app to check what options you’re invested in
- Speak to one of our financial advisers. You can book an appointment online or by calling 1300 300 820 – you can meet with an adviser by video conference or on the phone*.
* Fees may apply
General advice warning
This article includes general information and does not contain any personal advice. It is provided for general information only, to help you understand the investment switching and the current market volatility. The information does not take into account your personal objectives, financial situation or needs. You should consider whether it is appropriate for you and your personal circumstances before acting on it and, if necessary, you should seek professional financial advice.
We recommend that you obtain financial advice before making any decisions about switching between investment options. To book an appointment with a Vision Super financial planner, complete the online form or call the Contact Centre on 1300 300 820 (Monday to Friday 8:30am to 5pm) to arrange an appointment. Advice fees may apply which will be discussed with you before any work will be undertaken.