The Association of Superannuation Funds of Australia (ASFA) has urged Aussie super savers not to panic following falls in Australian and U.S. share markets this week.
CEO Dr Martin Fahy said it’s important to remember that superannuation is a long-term savings vehicle.
“While monthly returns will vary, the long-term expected annual return for super funds is around seven per cent, well above the inflation rate. There is around $2.7 trillion in superannuation in Australia which supports people’s retirement and provides ballast to the economy,” said Dr Fahy.
Dr Fahy warned that savers changing their investment strategy to a more conservative option following stock market drops were likely to end up worse off over the long term.
“When markets fall, it’s a natural human response to panic, but if you switch your money to ‘safer’ asset classes such as cash and bonds, you risk missing out on benefitting from the recovery in share prices.
“The tail end of the GFC, when the ASX 200 Index bottomed out at 3344 points, was nearly a decade ago now. Since that time we have seen strong gains, despite periods of equity market volatility along the way, such as those we are witnessing at the moment. The reality is, these periods of volatility naturally occur in equity markets from time to time – according to the IMF, there were around 10-11 market crises every year between 1970 and 2011 alone.
“However equities continue to deliver long-term outperformance for patient investors such as superannuation funds,” said Dr Fahy.
ASFA research indicates that over periods of 25 years or more, average fund investment performance has been nearly 8 per cent a year, exceeding inflation growth by around 5 per cent a year; well ahead of the long-term target for funds.
Dr Fahy said that super funds have highly-skilled investment teams who invest money in a variety of assets, not only listed shares.
“The majority of Australians have money in default superannuation funds which diversify risk through investing in bonds, international shares, infrastructure and term deposits. On average, these funds have around 23 per cent of their investments in domestic shares and a further 23 per cent in international shares. This diversification provides a safety net against market volatility,” he concluded.
For further information, please contact:
Katrina Horrobin, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.