WA Super News
Update on investment market turmoil and what options you should consider
What has been happening?
As worry about the expected impact to global economies from Coronavirus intensifies, share markets have experienced a sharp sell-off. Since reaching its highs in late February, the ASX200 has declined by more than 15%, while the S&P500 has lost over 10%. On Monday 9 March 2020, the ASX experienced its worst single day fall since the Global Financial Crisis – falling by 7.9%*.
What should members do?
For most of WA Super’s members, the most appropriate response is likely to be ... do nothing.
Why? Because while shifting your assets to less riskier assets may reduce further losses, it will lock in the losses made to date.
Experiencing a market downturn is an inevitable part of investing. It is important to remember that whatever the cause, all down markets are temporary. Although we cannot predict the future, history suggests this time will be no different even if we cannot predict when or how markets will turn.
Performance of WA Super’s portfolios
At WA Super, we believe in the importance of diversification. That means we design our diversified options (Conservative, MyWASuper, Moderate and High Growth) to rely less on share markets to generate returns than other comparable options in the market and instead invest across a broader range of asset classes. We deliberately construct portfolios in this way to lessen the impact of large share market sell-offs. For example, against the significant falls in equity markets of around -8% in February, we estimate the WA Super diversified investment options (accumulation) returned around -1.4% for Diversified Conservative, -2.2% for MyWASuper and -3.5% for Diversified High Growth. If you are invested in these options, you may want to consider not doing anything at all. For members who are feeling very uncomfortable with the level of risk in their current investment strategy, it may be appropriate to consider reviewing your risk profile or seeking professional financial advice.
Factors to consider if you are wanting to switch investment options
Any members considering switching investment options should keep the following in mind:
- Your superannuation needs to last for a long time, and to generate an appropriate level of returns, its important to maintain exposure to growth assets
- Switching to a more conservative option or cash after a market crash locks in all losses experienced to that point
- When shares and other risky assets recover, more conservative strategies will not experience gains to the same extent as more aggressive strategies.
For members with long time horizons, such as those with 20 years or more until retirement, it is highly likely that this is only one of many market crises you will experience throughout your life. It is important to take the long view and to remember that over time, taking higher risks bears higher rewards.
Get some advice
Before making any change to your investment strategy, we’d encourage you to speak to one of our Member Services staff on (08) 9480 3500 and consider whether it is suitable to seek professional financial advice. As a WA Super member, we believe it is important for members to be able to access the right personal advice at the right time whether that be digital, intrafund or comprehensive advice.
Notes: *Source: www. asx.com.au
Investment returns can go up and down and are not guaranteed. All investments have risk, and past performance is not a reliable indicator of future performance. For more Information on risks associated with investing, read our product disclosure statement at wasuper.com.au.
The information provided in this article contains general advice which does not take into account your specific objectives, financial situation or needs. Before investing, you should consider the appropriateness of this general advice with regard to your personal circumstances. You may also wish to obtain independent financial advice.
Issued by WA Local Government Superannuation Plan Pty Ltd ABN 64 066 797 162 AFSL 269009, as Trustee for WA Local Government Superannuation Plan ABN 18 159 499 614.