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Superannuation: Has Your Nest Egg Decreased?

Opinion By Olivia Maragna, as published in the Sydney Morning Herald

More than 14 million Australians have a superannuation balance, with most having some exposure to shares, property and other growth investments that move in value.

While superannuation has performed well over the first quarter of the financial year, October was a disappointing month, with market conditions eroding these gains. With the local sharemarket falling by about 8 per cent since August, it’s very likely that your nest egg has decreased in value.

So, should you be worried?

Here are three questions to ask during these volatile conditions.

Where is it invested?

It’s important that you understand where you invest your super moneys. Have a look a how much you have in cash, fixed interest, property and Australian and international shares.

Like any investment, the more risk you are willing to take, the larger the returns or losses you could get. If you have elected to take more risk and put your super in a “high growth” option, you are likely to see more volatility and movement when the share market moves. Super fund members in a “conservative” option are likely to see less.

Don’t forget to talk to your super fund and your financial adviser before deciding on what level of risk you are prepared to take, and whether you should be making changes to your asset allocation regularly.

How does this affect me long term?

Superannuation shouldn’t be a “set and forget” strategy. Early on in your working career, it is generally appropriate to check your balance at least once a year. As you get closer to retirement, it is a good idea to keep a closer eye on your balance every quarter or half-yearly to see how it will influence your overall retirement planning. Understanding the longevity of your funds and how this volatility is going to affect you long term is important.

Should you act?

At times like this it’s important to stay calm but not be complacent as the volatility is likely to continue.

Remember some of the fundamental principles of investing, such as making sure you have a well-diversified portfolio and investing for the long term, but do not forget that cash plays an important part of your portfolio to help ensure you are not selling down investments at a bad time to pay for your lifestyle.

If you haven’t had a review of your investments in a while, are managing your investments yourself and need some guidance or are concerned about the impact this volatility may have, pick up the phone and talk to your financial adviser.

Olivia Maragna is the co-founder of Aspire Retire Financial Services and is an independent and respected financial expert. Olivia’s advice is general in nature and readers should seek their own professional advice before making any financial decisions.

You can follow Olivia on Facebook or Twitter at https://twitter.com/oliviamaragna