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With the impact of the coronavirus outbreak (COVID-19) constantly in the news headlines, it’s difficult not to get nervous about the impact this may have on your investments, including your super. COVID-19 is having a real, material impact on global economies and the disruption is likely to continue for some time.

At times like this, it’s important to look at the bigger picture and to take the time to consider the context of the current market volatility on your super which by its nature is a long-term investment.

Just like the illogical, but hard to ignore rush to stockpile on toilet paper, the tendency in times of any market instability can be to move investments into ‘safe’ assets such as cash. For most people a move to lower risk assets also means a lower return over the longer term – reducing retirement outcomes. Moving to lower risk assets also means ‘locking in’ losses and potentially missing opportunities for future growth as markets recover – which they historically have always done (eventually).

Some important things to consider

Here are a few important things to consider before making any changes to the way your super is invested:

Diversification provides some immunisation from the COVID-19 impact

The current short-term negative impact on your super is largely contained to the exposure your investment option has to local and global share markets. Most of our members are invested in one of our diversified investment options which is invested across a range of different asset classes.

For example our default MySuper Balanced option has around 49% invested in local and global share portfolios, the remainder is spread across Property, Infrastructure, Fixed interest, Cash and other Growth/Defensive investments. You can find out more about our investment options here.

The full impact on financial markets is unknown

While the spread of COVID-19 has stabilised in China, its spread to new locations around the globe is concerning. It is likely that the virus will continue to spread before it is contained (such as when an effective vaccine is produced and distributed). Alternatively it could spread to the point that it becomes part of our ‘every-day’.

The disruptions to travel and global supply chains are likely to continue for some time prompting governments to respond with fiscal stimulus policies and markets to adjust.

No-one knows when markets will bottom – or when they will begin to rebound

One thing is known for certain, market downturns no matter what the cause are inevitable and temporary – they always come to an end and the market always recovers. They have happened before (refer to this article we wrote a little over four years ago) and, as history shows, they will happen again.

What is never known is how long the downturn will last, how far markets will drop and exactly when they will start to recover. If someone is telling you otherwise, we suggest you turn your back and walk away before you hand across your hard-earned savings.

Stay your course or risk lower returns in the long term

In the current low interest rate environment, it’s important to recognise that you need to either tolerate the fluctuations in investment markets for long-term gain or to accept the very low rates of return provided by cash or similar low-risk investments. You don’t get the benefits of higher long-term returns without the risk of market fluctuations – again, if someone is telling you otherwise, we suggest you turn your back and walk away before you hand across your hard-earned savings.

You need to weigh up which is more important to you – longer term returns or shorter term security. For most of us, our super has a long-term investment timeframe that enables us to absorb the impact of market fluctuations and corrections over time. Even in retirement, for many people super will remain invested for 20-30 years and the benefits from strong returns can have a significant impact on how long your super will last.

Your investments are managed by experts

Mercy Super’s investment options are invested across a broad range of asset classes and markets depending on the option/s you have selected. Each investment option is carefully managed to ensure that Mercy Super members have the best possible chance of achieving their desired outcome.

In the rare instances of prolonged market volatility, investment managers will take necessary action to meet their aim of getting the best return for members that the prevailing market conditions will allow.

We’re here to help

Our in-house financial advisers can provide you with information and advice on our range of investment options and always act in your best interests.

For most members the best answer is likely to be to sit tight and keep your investments where they are. However, no matter what you do, be assured that there are no additional transaction fees that will apply to your account – no fees for switching, no buy/sell fees for redeeming any of our investment options, and no exit fees for transferring your super to somewhere else.

If you want to check that you’re invested in the right option/s to meet your retirement goals, just call us on 07 3163 8880, send us an email at information@mercysuper.com.au or drop in for a chat. You can find us on the Ground Floor of the Potter Building, Mater’s South Brisbane Campus, South Brisbane QLD.