Market volatility update

八月 16, 2011
Joe Chan

Recent events have shown that the share market can fluctuate greatly in just one day and while heightened market volatility is being experienced now, short?term volatility in the share market is not unusual.

Our approach is to look through the short-term ‘noise’ the market is making and manage your investments in a measured way over the longer term. We don’t react to market events on a day-to-day basis, but we do continually monitor and rebalance as necessary.

Our investment capability has been expanded over the last few years to form a diverse team of investment specialists, who continually assess economic and market fundamentals to ensure investments are appropriately valued. If necessary, these specialists can make adjustments within the asset allocation ranges set for investment options.

For example, we have held certain views for some time regarding the expected rate of recovery of the world economy post the Global Financial Crisis and of debt positions of certain countries. As a result, our Ready Made options such as Balanced (Default) have been more conservatively positioned, which has been achieved by gradually increasing exposure to bonds and reducing exposure to shares.

We are confident our long-term approach is still holding firm despite recent market volatility and that significant changes in our strategy or in our portfolio positioning are not needed. In our opinion there are no major mis-valuations in either the share or bond markets, and we view markets as liquid, so we will continue to trade as normal.

As a result we will maintain our long-term approach to investing, which means we are not looking to alter the prescribed asset allocation ranges set for our investment options in response to short-term market volatility. However, our investment specialists will continue to assess markets and the wider economic environment and we will adjust investments within these set ranges as we think necessary.

In uncertain times, it’s best to remember that superannuation is a long-term investment so a decision about your investment option or investment mix should be made with the long-term in mind.

If you are unsure if you need to take action, you may want to speak with a financial adviser.


Q. I often hear the term “paper loss” – how does this relate to my super?

A. The unit prices of the investments that you hold reflect the market value of your super. If the unit price has gone down, this is called a paper loss. A paper loss turns into a real loss if you choose to withdraw or switch your investment, thereby crystallising an actual loss.

To realise a loss, there must be an actual sale of an investment, or a switch from one investment option to another.

Q. When is it a good time to switch from one investment option to another?

A. Many members maintain their investment option or investment mix both in good and non-performing times, reflecting the long-term nature of superannuation. Time in the market is considered a better strategy, than trying to time the market.

Of course a decision to switch is an individual one and depends on your personal and financial circumstances and needs. If you are worried about the current market volatility you may want to consider the following:

  1. Normal market cycles means the value of investments do go up and down.
  2. Most investments have a long-term return projection – past performance is not a reliable indicator of future performance.
  3. Investments decisions should be rational, not emotional, and should be based on your investment timeframe and investment objectives.

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