Ask Paul: Volatile world events have me worried about my super

Paul, I would like to ask you about the best option for my superannuation strategy due to the US tariffs and the ASX shares losing so much in recent weeks.

I am 55 years old, and my balance is now $393,000; it was $420,000 three weeks ago.  

Should I change into a cash option or more property rather than international and Australian shares ASAP? 

I don't want to lose more in my super due to this sudden market downturn globally. Are we heading to another global financial crisis in the next two years? - Fez

If only I knew, Fez. What I would have told you if you had asked me this 'live' on radio a few weeks ago would have been "stick to your strategy, selling in a downturn is generally a bad idea".

Of course, as I write this, markets have recovered and so will your super. By the time this is published, markets may well be up or down.

Reacting to short-term events is a terrible strategy. This tends to see us buying at peaks and selling at lows.

What I want you to do is to decide what level of risk is appropriate for you.

Over the long term, growth and assets have historically delivered higher returns. Investments such as cash or term deposits are terrific for money we want to keep safe, or need in the short term, but their long-term returns after tax and inflation are terrible.

I am nearly 70, but I continue to hold my super in a growth-type portfolio. This is personal, but it works for me. As with nearly all long-term super money invested in growth assets, my average return over about 40 years is in excess of 9%pa.

Sure, in bad market years I go backwards. My risk tolerance is pretty high, as I know if I am patient markets will recover.

About the only change I have made now that I draw a pension from my super fund is to keep a slightly higher cash holding, so that in a really bad downturn my cash - dividends from shares and income from other investments my fund holds - covers my pension, meaning I don't need to sell growth investments when they're down.

My advice is to forget erratic short-term movements. Decide what level of risk you can sleep with and go with an appropriate mix of investments.

Thank heavens I followed the history of markets. Left in cash and fixed interest for decades, my pension today would be pretty pathetic. Remember, time in the market is your friend.

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