Skip to main content

My super is going down. Or is it?




It’s no secret that investment markets are being punished at the moment and we’re all seeing the balance of our super funds dropping.  Not a nice feeling? Welcome to the world of investor psychology. 

Investor behaviour is for the most part counter intuitive, when markets are up we’re all happy and many of us want to invest more.  When markets are down, it’s doom and gloom and some even sell out. But if you think about it, that doesn’t really make sense.  In reality, the risk of markets falling is greater when they’re at their highs and the likelihood of them going up is greater when they’re at their lows.

For most of our super funds, the longer the market stays down the better.  Most of us can’t access our super for a very long time so a depressed market is actually good.  There should be regular contributions going in to your super fund from your employer and at the moment these contributions are buying into very cheap assets.

BHP, the world’s largest mining company, has a share price currently sitting below $15.   It’s been close to $50 in the past.  Many other companies are in the same boat. In addition to your employer contributions, your super fund is regularly buying more assets probably without you even realizing it through dividend reinvestment. 

If you have a share based asset mix in your super fund, your fund receives income in the form of a dividend.  This is basically a share in the profits of the underlying companies your super has invested in.  And as a bonus, many of these dividends carry tax credits (imputation credits) which can be utilised by your fund. The trick of course is to make sure your super is invested in a quality fund that holds quality assets.
So while everyone is in a panic about the state of the market, just remember, your super fund is actually increasing its asset base as it purchases assets at very low prices.  You’re getting more bang for your buck.  Sure, the current value of your fund is down but as markets recover, you’ll have all those assets you’ve bought at cheap prices working for you and going up with the rest of the market.

Andrew O’Brien and Hindsight Group Pty Ltd t/as Hindsight Wealth Pty Ltd (ABN 88 168 442 528) are Authorised Representatives of Synchron AFS Licence No 243313.  Andrew O'Brien. FINANCIAL ADVISER. P 07 3852 3025  M 0403 156 625  E andrew@hindsightwealth.com A Suite 4 / 30 Florence Street, Newstead QLD 4006.  To view our Privacy Policy, click here.  


Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

Times are tough. How can you position yourself to minimise the impact?

The last few weeks have been extraordinary to say the least. We’re battling a world wide health crisis and we face uncertainty in many aspects of our lives.  It’s true that there are simply some things beyond our control and we will more than likely see many changes to our everyday lives for the remainder of 2020 and beyond. So, what can be done?  On the other side of this, many people will be left with dramatic financial stress, whether it be periods of unemployment, depleted cash reserves or battered superannuation balances.  And for many, timing will be an issue. Those who were weeks ago contemplating retirement may now need to change their plans. And those that are still accumulating for retirement have more than likely just seen their investments and superannuation return to levels of 5 or 6 years ago. Essentially the clock has be wound back in one way or another.  It may well be a good time to take stock and lay some foundations for when thing...
Post a Comment
Read more

There is no better time than right now to review your super!

So by now we all know that Australian and global investment markets have fallen significantly, it’s on the news, in the papers and I’ve been publishing recent posts about it on LinkedIn. What’s causing it?   Truth is, it doesn’t really matter.  Oil prices are down, there’s talk of China slowing, commodity prices are down and so forth.  Historically there is always something occurring on the world stage that can cause negativity in markets.  Investors start to worry, they sell their investments at low prices, lock in losses only to have someone come along, buy them up and enjoy the gains as things recover. Warren Buffet, the world’s most famous stock market investor famously said, “The stock market is a device for transferring money from the impatient to the patient”. And we can see this today.  As I write this, global stock markets suffered a large decline over night, with the expectation being that the Australian market would follow this morni...
Post a Comment
Read more

Don't Wait till you're in your 60's to see a Financial Adviser

Ask most 30-year old’s who their financial planner is and the typical response might be ‘huh?’ After all, financial advisers are for older people with plenty of money to invest, aren’t they? Well, yes, people nearing or in retirement will benefit from sound advice. But so will younger people. With the benefit of having time on their side, and with some help from an adviser, a 30-something can easily establish a wealth creation plan that can deliver a big payoff in the future. Harness compound interest It’s been called the most powerful force in the universe, and compounding returns – earning interest on your interest – can deliver dramatic results. Imagine that, at age 30, you commence a simple savings plan. You contribute $2,000 each year to an investment that delivers an after-tax return of 6% pa. After 30 years you will have contributed a total of $60,000, but your investment will be worth $158,116. The magic of compound interest will have delivered you an effortles...
Post a Comment
Read more