Are you worried about the Share Market?
Written and accurate as at: Mar 21, 2023 Current Stats & Facts
The Australian share market has been down 16% twice in the last 18 months when compared to the high of August 2021 and the US share market has been down up to 25%. The increases in world interest rates from all-time lows back to more normal rates over this period has sent shock waves through the financial system. The latest casualties have been some international banks who’ve made some short sighted decisions and, whilst our larger banks in Australia are well run, there may be more casualties around the world over the next few months.
Investing in growth assets like shares and property is a long-term game. Growth assets always average out better then defensive assets like cash and fixed interest in the long run if you invest in a well-diversified portfolio of quality, blue chip assets. The reason you need to look long term is that growth assets fall in value as well as rise, so you need to give them time to average out.
Investing in growth assets is like buying a farm. You know there’ll be years where you go backwards. The reason you buy the farm is that if you don’t panic, hold on and run your business well, in the long run the good years will more than compensate for the bad and you’ll come out with a good average.
The key here is trying to take the emotion out of it and think rationally. If you hold a quality asset of long-term value and suddenly it’s price drops, emotionally you want to sell. Logically, this is the worst time to sell. Ideally, you should try to buy more whilst the price is low.
To relate this to super, if you monitor your balance regularly you will have seen some significant falls since late 2021. If you’re still working and have five years or more to go until retirement it is nothing to worry about as you are a buyer of investments. Think about buying some more by making some extra contributions whilst the market is down. If you’re close to or in retirement, then you are a seller of investments as you regularly withdraw your pension. If you don’t have a protection strategy built into your super pension, you should talk to someone. With no strategy in place your options are to draw less pension to ensure your money lasts or accept that it will run out quicker if you keep drawing the same.
The key to retirement planning is having a plan. Talking to an expert means you’ll understand the big picture of how long your retirement pot will last and how much income you can draw. You’ll also know you’re maximising your Centrelink entitlements. Whilst protection strategies have a cost for retirees, every one of our retiree clients have one in place in their super pensions. They all decided that when the inevitable crash happens, they don’t want to be forced to draw less pension or worry their money will run out early. They want to protect the ability to draw a good income and enjoy those hard-earned retirement years no matter what the share market is doing.
