Superannuation has played a very important role in millions of Australians’ lives when it comes to retirement income. It has become the primary form of retirement savings for most Australians. It is different from life insurance, but they are closely related – you can now buy life insurance, income protection insurance, or TPD through your superannuation fund.

For those who depend heavily on their super, the highs and lows of the market could give someone quite a scare. If you look at the current economy today, you will notice its roller coaster-like uncertainty as stock markets make its rise and fall dance amidst fear of another US and European economic meltdown. Then you cannot help but wonder what you are going to do with your super and investments in the current state of the financial market.

‘Uncertainty’ is truly one of the words that most people fear. Who wants uncertainties especially if your superannuation is going towards maturity? You don’t even want it whispered ever so softly anywhere near the future of your savings.

And what’s more unfortunate, it is not easy to come up with answers to questions about how to protect your investments and savings. However, it may come as a comfort knowing that there are some general principles or guidelines we can follow to help us manage our financial situation wisely.

The first of these guidelines might come as a surprise since it is the most common but perhaps neglected truth: seek financial advice before committing yourself to any financial decisions.

The Australian Economy and Superannuation

It is a fact that the global financial climate we live in will definitely affect everybody. Although the impact in each region may be different, we will all still be affected. Therefore, what has happened in the US and Europe will surely affect Australia.

The good news, though, is that Australia is still in a good economic position even if this global economic uncertainty were to continue. Although not immune to market volatility, studies still show that investors and super fund holders are still in good hands.

The reason for this is the steady performance of the resource-rich mining industry which still shows impressive profits. There has been a posted net profit of $6.84 compared to the US’s slow recovery progress.

With these facts in hand, you can have the peace of mind that your investments and super fund will still be there tomorrow. There are also steps you might want to take to further ensure that you get the best out of your super funds.

Playing It Safe in the Market

Market volatility will never give a clear definition of what safe investment is all about. Investments and the market are synonymous with risks whatever type of asset vehicle you are in. No matter how young you are or how your appetite for risk is strong, you cannot just overstress it. Professional financial advice is still needed if you want to thrive.

However, as your superannuation fund reaches its preservation age, you might want to look at much safer investments, such as cash and bonds. It is also the best option if you are not keen on taking bigger risks.

Check your investment profile thoroughly.

One word of caution, though – don’t solely trust the name your super fund gives an investment profile. Take time to check out the actual investment structure as some profiles might claim to be safe, but actuality heavily invests in shares.

Diversify your portfolio.

However, if you are setting your sights long term, then you might consider having a diverse portfolio. Historically, diversity of investments is the safest since it mixes and balances different risk assets. Recent surveys show that balanced funds have recovered earlier losses and are positively making solid returns. This may seem contradictory considering the dramatic dip of many people’s super; however, if you look at it on a longer point of view, the median losses of balanced funds are relatively low.

Keep your investment time frame.

Having a time frame when you have made some investments will help you with making sensible decisions. Considering market volatility, it is easy to sell shares and get out of investor markets in order to protect your finances from further damage; however, it crystallises any losses you have. Therefore, being committed to your time frame can help you what financial decisions to make.

Boost your super.

Another way to reinforce your retirement is to boost your super fund; and there are a lot of ways to do this.

• You can opt for a salary sacrifice where you give additional contributions to your employer super contributions. This could give you tax benefits and co-contributions eligibility.
• You can also locate and combine various super accounts you have acquired during your working years. This saves you on a lot of extra fees which you might otherwise use for other purposes. Secondly, it saves you time as well by maintaining a single super account.

Market volatility will always be a fact. But you can have steady and solid returns when you think of your investments as long term. To be more confident of your investments, talk to a financial expert to help you devise a good strategy for your super.