Should you switch your super to cash when markets fall?
Thinking of moving your super to cash after the market drops? Here are five questions to check before making a costly switch.
It's hard to ignore headlines on stockmarket volatility. But with the silly season behind us, and much of 2026 unknown, it's worth remembering that super is a long-term investment, and trying to pick market highs and lows is a mug's game.
Despite three major sharemarket downturns, since the introduction of compulsory super in July 1992, the median super growth fund has returned 8% a year, according to research conducted by Chant West.
In other words, ride out the lows and your super will do its job and produce solid gains over the long term. What then should you keep in mind when markets are rattled by economic and geopolitical uncertainty?
Why market volatility doesn't mean you should switch to cash
General manager of guidance and advice at Aware Super, Peter Hogg, says his fund often hears from members when they are spooked by volatile markets, and the impact it is having on their super balance.
"Our response is that the best course of action is to focus on your long-term goals and stick to your long-term strategy.
"It's important to keep in mind that market volatility is a normal part of investing."
How long-term super returns weather market turbulence
Hogg says it's common for investors to react to different pieces of news or events and try to gauge its impact on the value of their investments.
"History shows us that markets tend to recover and rise again. At Aware Super, we take a long-term view and focus on building a diversified portfolio designed to ride out short-term volatility and grow members' savings over the long term.
"So it's important that members in accumulation, as well as those nearing or in retirement, don't panic and have knee-jerk reactions, and seek advice before making any changes when markets are volatile.
"If you are spooked and switch to cash after a market fall, you risk locking in losses and not benefiting when markets rise again. Short-term volatility typically has little impact on long-term returns, but switching can have a negative effect on a member's final balance," says Hogg.
What happens when you switch to cash at the wrong time?
During the global financial crisis of 2007-09, growth funds dropped by about 26% on average. Those who panicked, especially retirees, and switched into their fund's cash option, faced long-term, negative consequences.
Hogg says the GFC highlighted the importance of staying invested and being in a diversified option. He says most of his fund's 1.15 million members are invested in diversified options.
"This means their money is not just invested in shares, it's spread across other investments like property, infrastructure, cash and bonds. Consequently, when sharemarkets fall, the fall in their balance typically won't be as large as those in sharemarkets."
Ultimately, his message is that a rational approach will beat a panicky, emotional one that's driven by the pain of financial losses.
"Our research found that about a third of members who switched to cash in a market downturn missed the rebound when they eventually returned to their strategy.
"If you do start to feel panicked, try to remember to stay calm and that market volatility is a normal part of investing. Also remember your super is a long-term investment and often sticking to your long-term plan can be the best approach."
So switching out of your diversified portfolio to the 'safety' of cash and then jumping back in at some later date can be costly.
"Changing your long-term strategy can have a negative impact on your final balance," he says.
Aware Super's graphs show the impact on members' balances of switching their $100,000 investment to cash following the COVID-19 market falls, from the beginning of 2020 until June 2025.
Members in its Future Saver High Growth option would have been worse off by $47,481 by switching to cash while those in the fund's Retirement Income Conservative Balanced option would be $29,776 worse off over this period.
Five questions to ask before changing your super investment option
Hogg says Aware Super encourages members to contact them via their app or to call before making any changes.
"We ask our members a few important questions to make sure those changes are aligned with your personal circumstances and retirement goals."
- The first question is what's your investment timeframe and the future impact of making a change. As super is a long-term investment, any investment options or changes you make today can have a big impact on the balance you retire with.
- If you invest too conservatively, it can be risky because over the long term your investment may not earn a return above the inflation rate. If your super grows at a rate lower than inflation, you could be losing money without realising it.
- Second, is this the right time to change investment options? If you switch your investments after a share market fall, you could be selling at a low price and locking in a loss - markets are hard to predict.
- If you switch into a lower risk option when markets fall and don't switch back until after markets rebound, you will miss the early gains (which are often the strongest) and may buy back at a high price.
- Even if you've stopped working, your savings could be invested for more than 30 years, and about 30% of the income paid from your retirement income account could come from the returns you make in retirement.
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