Market volatility: Your questions answered

Coronavirus is having a significant impact on share markets around the world. Here are the most common performance-related questions our members are asking us.

The Australian share market, along with the rest of the world, is having a bumpy ride at the moment. Understandably, this volatility worries some of our members. Particularly members who are getting closer to retirement.

Below, we have answered some of the most common volatility-related questions we get asked.

General

Q: How much have I lost?

A: Even though share markets are volatile, and even if that’s affected your account balance right now, it’s important to realise that you haven’t actually lost anything unless you transfer/switch/sell your investments. If you do, that’s called “crystallising a loss”.

How does that work?

As an example, on Friday, 13 March 2020 the Australian share market initially dropped, then finished the day higher. If you bought shares at the start of the day, then sold them at lunchtime, you may have lost money (crystallised a loss). If you held the shares all day and sold them at the end, you may have made a profit. If you simply bought them and held onto them, you haven’t lost (or made) anything, you continue to hold those shares or units.

Q: Is my super safe?

A: This is a very important question because your superannuation is a big deal. It’s a big deal – but it’s not a one-year deal. QSuper is an industry leader in long-term performance so when markets are jittery day-by-day, it’s important to take a deep breath and consider your long-term perspective.

Our 5 and 10-year investment performance is here.

Our investment strategy is to invest in a “risk-balanced” way; we focus on risk allocation not asset allocation. It’s a diversification approach different to that taken by most other superannuation providers and a factor in QSuper receiving the inaugural SuperRatings ‘Smooth Ride’ award in 2020, recognising us as the fund that has best weathered the ups and downs of the market, while also delivering strong outcomes¹. We’ve explained our investment strategy in more detail here.

Q: What should I do/what is everyone else doing?

A: For most members, the answer to both of those questions is nothing. In other words, sit tight and do not react to the current cycle of market volatility.

In terms of what you personally should do – everyone’s situation is different and depending on your stage of life, retirement plans and other specific goals, you may want to get some personal advice. We give our members access to over the phone financial advice on specific topics related to your QSuper account, at no out of pocket cost².

If you’re feeling worried about the current short-term volatility, personal financial advice might help to reassure you.

In terms of what everyone else is doing – we do see a higher number of investment switches come through when the share market is volatile, but the vast majority of our 585,000 members do nothing.

Q: What were the government changes announced recently in relation to early access to super?

A:We have written a summary of the announcement here with regards to the new early access measure. There were also changes announced regarding superannuation minimum drawdown requirements and that is summarised here.

Investment

Q: How is QSuper responding to market volatility (are you actively managing your investments)?

A: While the majority of our members do nothing, that’s certainly not the case for QSuper’s Investment team – but it’s also no different to any other trading day.

When markets are volatile QSuper’s Investment team stick to our long-term strategy of risk-balanced diversification. This involves active daily management of the shorter-term asset allocations within the QSuper portfolio³. This daily management occurs in all market conditions.

Q: I don’t have time to wait for the market to pick up, what should I do?

Q: Should I switch to cash?

A: We know some members are feeling very stressed about the current share market volatility, particularly members in retirement or close to retirement.

Understanding that even though share markets are volatile and down, and it’s affected your account balance right now, it’s important to realise that you haven’t actually lost anything unless you transfer/switch/sell your investments. If you do, that’s called “crystallising a loss”. See our answer to the first question in this article, which includes an explanation of ‘crystallising a loss’.

If you’re unsure about what you personally should do, we give our members access to over the phone financial advice on specific topics related to your QSuper account, at no out of pocket cost². Personal financial advice might help you to make your investment decisions confident that they’re the right ones for you.

Q: I switched to cash last week, was this the right thing to do?

A: Switching to cash means that you’ll be protected against further falls on the share market – and also means that you will be excluded from future increases on the share market and you have realised any losses, so unfortunately there is no one perfect answer.

Learn more about QSuper’s investment options, and hear more about how we manage your superannuation in volatile markets from our Chief Investment Officer, Charles Woodhouse.

Q: I want to withdraw all of my funds to stop them being impacted?

Q: Why don’t you pause our funds/stop investing, etc?

A: The current share market volatility is very concerning for most Australians, including many of our members. We’re updating our website regularly with the most common questions you’re asking us. Unless you’ve met a condition of release, you can’t withdraw your money from superannuation, but you can decide what investment option within your super fund is best for you personally.

When markets are volatile like they currently are, the Investments team at QSuper does what it does every day. We stick to our long-term strategy, which involves the daily management of the shorter-term asset allocations within each of the QSuper diversified investment options (ie Lifetime, Balanced, Moderate & Aggressive). This daily management occurs in all market conditions. Hear more about how we do this from our Chief Investment Officer, Charles Woodhouse.

Q: How long does it take to switch my investments?

A: If you’re making an investment switch, the switch of your current investment mix will in most cases be reflected on your account in two working days after we receive your application. Your balance will remain invested as is prior to the switch occurring. Switches submitted after 3pm (Queensland time) on a working day, or at any time on a non-working day, are considered to be received the next working day.

You will receive the unit price two working days after we receive your application. However, in the meantime please remember our unit prices (and therefore your account balance) reflects market movements and asset valuations from two working days prior. Future contribution preference changes take effect immediately. Find out more about switching.

Before you change your investment mix though, it’s important to be informed and seek advice about whether you need to take action during these uncertain times. You can hear about how we manage your superannuation in volatile markets from our Chief Investment Officer, Charles Woodhouse.

Retirement

Q: I planned on retiring and withdrawing my super soon, what should I do?

A: It’s a very difficult decision, because if you sell your investments when the value has decreased, you lock in that loss. See our answer to Question One on what that means.

When you do reach a condition of release (such as retirement) there are alternatives to withdrawing your money from superannuation. In retirement, you might choose to take advantage of an income account, with tax-free investment returns. QSuper’s Retirement Income account is an example of that. However sometimes you might be wanting to withdraw your money from superannuation for a specific reason, such as paying off a mortgage or buying a property. Alternatively, you can leave some of your super invested and access funds as a partial withdrawal when you need cash.

Ultimately the decision on whether to withdraw your money from the superannuation environment when you retire (and if so, when) is one that you need to make, by weighing up the pros and cons of withdrawing it right now, or waiting.

Overall, in retirement, a diversified investment strategy is one that holds an amount in cash suitable for short-term needs over a period of time, such as for regular drawdowns of income payments, mixed (or balanced) with other investment options to provide some growth.

Q: I’m in retirement – what should I do about my money?

A: When you’re in retirement rather than the working phase of your life, access to your savings is essential. Ideally you want to be able to draw your income without locking in losses on your entire nest egg. The strategy that many retired members choose is to hold a couple of years’ worth of income payments in the cash investment option, among their other investments. That way, when markets are volatile and down, they can choose to take their regular income payments from this option, and avoid crystallising a loss on the part of their savings that are invested in shares or property or other growth assets.

See our answer to the first question in this article, which includes an explanation of ‘crystallising a loss’.

Q: Are you going to drop the minimum % needed to draw down from an Income account?

A: The government recently announced that it intends to temporarily reduce superannuation minimum drawdown requirements for account-based pensions (such as QSuper’s Income account) and similar products by 50% for 2019-20 and 2020-21. You can read about the change here.

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1. SuperRatings does not issue, sell, guarantee or underwrite this product. Go to www.superratings.com.au for details of its ratings criteria. Past performance is not a reliable indicator of future performance. Ratings, awards or investment returns are only one factor that you should consider when deciding how to invest your super.

2. QInvest Limited (ABN 35 063 511 580, AFSL 238274) is a separate legal entity responsible for the financial services it provides. For Income and Accumulation account members who receive personal financial advice from QInvest, the QSuper Board may pay for some or all the advice fee for advice related to your QSuper benefit. Eligibility conditions and some advice fees may apply. Refer to the Financial Services Guide for more information.

3. The term ‘QSuper portfolio’ is used to refer collectively to the underlying portfolios of assets which in combination make up the individual asset allocations of QSuper Lifetime and the Balanced, Moderate and Aggressive investment options.