Sydney, Australia (PressExposure) February 09, 2009 -- Super decisions: Under 55 If you're at the start or middle of your working life, the good news is you have time on your side â time for the markets to inevitably recover. Even if you are in your early 50s and plan to stop working at 65, you still have around ten years or more to continue adding to your super and building your wealth.
History tells us that over time share markets do gain back their previous losses and rise to new highs. So if you're concerned about the current market situation, perhaps the best option is to seek advice and focus on your long-term retirement savings goal.
Long-term investing is hard to do There's no doubt that focusing on your long-term goal is easier to do when markets are growing and super returns are strong. When markets start falling, however, it's not uncommon for some investors to get nervous and try to halt the falls, usually by moving their investments out of growth assets like shares and into more defensive asset classes, like cash. Why do we do this? Research by economists and behavioural finance experts Kahneman and Tversky1 suggests investors feel a financial loss around twice as much as a financial gain, and are willing to take on more risk to avoid a loss.
While moving super from the volatile environment of shares and into cash might not seem like a riskier option, the real risk could be leaving super in cash for too long. Because few investors can 'time' a market recovery, moving your money into cash could mean missing the âbounceâ when share markets recover.
You're buying cheaper â more for less Don't forget that markets are now cheaper than they have been in some time. Contributing to your super when the market is down gives you the opportunity to benefit from increased gains when the market recovers. And remember, while the Australian sharemarket may be volatile in the short-term, Australian shares generally perform better than other asset classes over the long-term.