Protection for share market volatility

It’s natural to worry about how shifts in the share market will affect your retirement plans. There are a few things you can do for a little extra piece of mind, whether you’re looking to retire soon, or just want to sure up your super for any future market dips.

Understand what your super is invested in

How risky or stable are your investments? Changes in the market shouldn’t be a surprise – they have happened before and they will happen again – so the key isn’t prevention, it’s planning so your super fund is set up the right way. I’m a big believer in ‘what you can measure, you can manage’ so ensuring your investments are balanced, rather than being weighted towards market-sensitive assets like shares is key to making sure your super is less impacted when markets crash.

Have a cash buffer

I’m a big fan of having a buffer in lots of different scenarios in life, particularly in retirement. In superannuation, this means having an amount of money set aside that’s not exposed to risk (like being invested in shares) therefore won’t be affected by market fluctuations. If for example, share markets turn sour, you’ll have access to cash to draw your living expenses or pension from so you don’t have to sell shares when their values are low. This also allows you to continue to hold your shares and enjoy the recovery they will have over time. How much of a cash buffer should you have? This is different for everyone, so feel free to get in touch for a chat if you have questions about this approach.

Focus on income

There are two key things to consider when setting up the ideal super portfolio: the income paid from each investment or asset, and the asset’s potential growth. Over time, an asset’s value will rise and fall with the market, but the income generated from them will generally stay consistent. Ideally, your portfolio will be generating a sufficient income to provide for your expenses. Even when asset values are down, we want to be generating a consistent income, so focusing on achieving this is key.

Having a strong understanding of these three elements will help get you to a place where you are confident in your portfolio and therefore in your retirement plans. As always, should you have any questions or want to chat in more detail about your personal situation, you can get in touch at info@financialedgroup.com.au