Superannuation & Share dive

Every working Australian is invested in the sharemarket… through their superannuation.

As global sharemarkets tank and the doomsayers predict another Global Financial Crisis, you just need to… stay alert, not alarmed. Investment history tells us this is always the best time to BUY shares, not sell them.

In times like this, you have to remember superannuation is a long term game. The worst time to sell is when markets are gripped by fear, and for those with iron guts, these fluctuations present an opportunity to buy good stocks on sale.

If you were happy to buy Telstra, the banks or supermarkets when the market was up around 6000 points a couple of months ago, what’s changed to make you uncomfortable buying them at a better price today?

As the often quoted Warren Buffet saying goes, be fearful when others are greedy and greedy when others are fearful. Right now, fear is rife.

However for less experienced investors, it’s probably worth sitting where you are for the moment until the outlook has cleared up. There’s a time to buy, a time to sell and a time to just sit on the sidelines, and right now we’re at the last station.

Following that, I’d argue it’s best to leave your superannuation where it is right now. But is worthwhile checking your superannuation statement to check which investment option your money is in.

Many people don’t know there are a number of investment options ranging from a balanced fund through to international shares, property, fixed interest and many more. Obviously if you have everything in a high growth international share option your returns will be hit harder than if you’re in a balanced option.

So just check which investment options you have and make sure they suit your risk comfort level always remembering superannuation is for the long term and they key is to have balance to ride out any downturns.

Cool your heels and take some comfort in the fact that markets will come back from this turmoil, just as they have in the past. People will still get up and go to work in the morning. Another brick will be laid and beer bought at the pub, and by and large the economy will continue on its way.

Let me leave you with some stats to chew on from Fidelity Investments…

Over the past 30 years, Aussie shares have returned an average 10.8 per cent per annum. So $10,000 invested in 1985 and left to sit through the global market crash of the 80s, the Gulf War and recession “Australia had to have”, bank collapses, terrorist attacks, the dot-com dive, the Asian Financial Crisis and US sub-prime crisis, among other things, would have been worth $219,730 at the end of June this year.

Markets fall hard, but they do get up. You’ve just got to learn to ride the punches.

For many experts, the worry with this correction is there’s no single catalyst for the carnage.

We’ve got an unresolved debt crisis in Greece, fears the US will start to increase their official interest rates soon and concerns about a slowing Chinese economy to top it off.

The last of those is a particularly sharp thorn in the Aussie market as China remains our largest trading partner, so if they slow further, they won’t need as many of our exports. Of course this would suck some life out of corporate profits and government tax revenues, and skittle the Aussie dollar too.

So there’s plenty resting on the shoulders of China’s central bank and government now to see what action they’ll take to arrest the fall in their sharemarket and, more significantly, foster the move from a command economy where the government drives demand, to more consumer led demand.

And until we see some stimulus to shore things up there, commodities will continue to wear the brunt of the pain and Aussie shares will suffer.

The trouble is that China is such a big cog in the global economy now that it’s not just Aussie markets that are falling. In the US, the Dow was down as much as 1000 points at one point on Monday night, after shedding over 1000 points last week. The picture in Europe is just as bleak.

 

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