Should I move all of my Super investments to Cash in uncertain times?

Wondering if you should move your super investments into cash with all the uncertainty in the world right now? The simple answer is no.

The events of 2020 have impacted financial markets all over the world, and it’s times like these people make rash decisions about their investments that they later regret.

It’s important to understand the long-term strategy of your superannuation and stick to the plan. Why? Because moving your investments to cash in times of market volatility is a short-term fix.

Holding your super in cash long-term doesn’t allow for as much growth, potentially impacting your super balance and your retirement plans down the track. Opting to move to cash means that at some point you will need to re-enter the market, which is very difficult to do with confidence and often, you’ll end up re-investing at a higher price than where you left.

The approach shown to achieve the best outcomes over time is diversification – holding a variety of both higher and lower risk investments in your super. When markets are shaky and some investments are down, other investments are protected and this helps balance the overall portfolio return.

Another factor to consider is your portfolio’s income. Though your shares or property may be down they are still providing an income, usually of between 3-5%. If you moved all of your investments to cash, you’re not likely to get a return above 1-2% which means you’ll be eating into your capital sooner and have less to help recover your balance when the time is right.

If you still feel uneasy about your current super strategy, I recommend you consider what allocation of growth vs. defensive assets you would be comfortable with. Once the markets normalize, chat to your financial adviser, or to us here at Financial Edge Group about making some adjustments so you feel more comfortable the next time the market shifts.