Will super funds ever recover?

Investment markets worldwide have taken a significant downturn this year and because super is invested in the markets, nearly everyone's
Super has been affected. Don't lose heart negative returns are something you should expect from super from time to time.

According to figures from super ratings, over a five-year period all funds regardless of how growth-oriented were still in the black.

Of course most super funds have a wide exposure to shares- that's the whole point. Super is a long term investment so if you stay in cash for decades, it may serve you well in years when equities take a beating, but overall you will never be a winner.

It has been known that over a 10 year period shares outperform all other asset classes. Analysts say that the fall is minor compared with the 50% gain funds have produced since 2003. The market can move 200 points a day, so it can recover quickly. It can even recover 3 or 4 % in a week.

If you are trying to time the market, by jumping in and out of cash and shares and balanced funds, it is a lot more difficult than it looks and generally you wont come out a winner.

Balanced funds generally invest about 32% of their money in Australian shares, 23% in international shares, 16% in fixed investments, 14% in property, 10 % in alternative investments and 5% in cash.

Switching out of your current investment mix or changing funds because you are dissatisfied with its performance, should be avoided if your only reason for doing that is panic.

The only reason you should consider switching is if you are uncomfortable with your current investment mix because you realize it is too aggressive for you.

By sitting tight and buying into a weak market will offer you the best opportunities to make the most of your retirement savings.

Super is viewed as a long-term investment, which has been ravaged by a storm, but remember every dark cloud, has a silver lining.

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Published on November 11-rd, 2008 in Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.
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