Super Takes a Hit - But Opportunities Still Exist
Published in the Weekend Gold Coast Bulletin, August 2011
Just as superannuation balances were about to recover their losses from the financial crisis, another share plunge has sent them tumbling again, wiping billions of dollars from Australian retirement savings.
In the past week, the average super fund has lost about $4500 for every $100,000. Australia's total super pool of $1.3 trillion has plunged by about $61 billion.
In almost every case, however, these losses do not have any immediate impact and experts advise people not to sell all their shares at once or switch to cash.
This can create an immediate loss, while at the moment, superannuation account holders are only nursing a -paper loss".
"The worst thing you can do is try to get out of the share market at the wrong time," said HLB Mann Judd superannuation manager Neil Howard yesterday.
"Even if you are age 65 tomorrow, you've still got at least 20 years of living ahead of you, so you still need to be investing for the long term.
"Maybe, you could take a more conservative approach to your investment choice but in most cases this won't even keep pace with inflation.
"Most people need to chill out. Don't worry about the markets."
However, for people who are already retired and drawing a pension there are several strategies they could consider.
"All managed funds have plenty of reserves and money flowing in every day from new contributions to keep up their pension payments, without having to cash in their shares or take any short term action," Mr Howard said.
Self managed super funds may, however, want to keep check of their cash levels.
"We always recommend people have between two and five years worth of pension payments in cash deposits so they can draw on this money, if the markets turn bad, instead of having to sell shares or other assets," he said.
So, where are the safe havens?
The price of gold has doubled since the global financial crisis as investors flock to the king of safe havens. Perth Mint treasurer Nigel Moffatt said he was expecting a stream of buyers this year.
"Gold has been a safe haven for more than 5000 years and no more so than right now," Mr Moffatt said.
"When the share market falls, investors flee to hard assets such as property," Portfolio Management Services managing director Jock Bing said.
"A large number of our investors have already seen this coming and are in the position now to take advantage of the uncertainty before others start buying," Mr Bing said.
Dale Gillham, an analyst at fund manager Wealth Within, named BHP, Rio Tinto, Newcrest Mining, Lend Lease and Incitec Pivot as his key defensive stocks.
"The time to exit our share market has passed," Mr Gillham said. "Now is the time to take advantage of the nervousness."
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