How younger members can make the most of market volatility

In unprecedented times, market volatility and the news headlines that follow can often be a cause of concern for members – particularly when it comes to superannuation. After all, the money you save during your working life could have an impact on your lifestyle in retirement.

Recent developments may have made you more engaged with your super fund than ever before – leading you to wonder what you could be doing for your investments at this time. As a Millennial with a typically longer investment horizon to retirement, is there anything you need to do to help you make the most of your wealth-creation journey? We share some considerations below.

It’s important to remember that markets often experience volatility – and for various reasons, whether political, economic, social or environmental. The Coronavirus outbreak is also a factor – but one that will likely pass

in time, as history shows us that markets do eventually recover from such disruptions. For example, since the Global Financial Crisis, global share markets have delivered returns of 10% to investors. In 2019 alone, global shares delivered strong returns of roughly 27%.

Super is likely one of the biggest (and longest-term) investments you will ever make – meaning, it can require a long-term view. Thankfully, time is on your side. As a younger member with decades of wealth accumulation ahead, you will likely have more time to ride out changeable market conditions to generate investment returns over the long term. By the same token, this can also mean that you will likely experience future periods of volatility over the course of your working life.

But while investing for super can require a long-term view, that doesn’t mean super is a set-and-forget scheme. It may feel like a long time away, but being more engaged with your fund now – even in simple ways, such as regularly reading fund updates, staying up to date on the latest market developments, or thinking about your long-term wealth objectives and how your super fund could help you achieve your goals – can be helpful to you later on as you approach retirement.

While market volatility could present investment opportunities, it is also sensible to continue budgeting and saving for a rainy day. For example, when maintaining a long-term view of investing, buying into share markets when markets are down (and cheaper) could mean the value of those investments rises when markets recover over time. However, it’s all about balance. In the current environment where day-to-day lives may be disrupted as a result of the Coronavirus, having a separate savings fund could offer some peace of mind in uncertain times – particularly for younger members who are working towards financial independence or who are kick-starting their careers.

Source: Colonial First State