Why it pays to stay
calm when markets are volatile

Your first instinct might be to switch into a more conservative investment option – like cash – to avoid further losses. Unfortunately, this strategy could leave you
worse off than if you had simply waited out the downturn.

Let’s break down why it pays to ride out the swings and roundabouts of the market.

Share markets rise and fall based on many different factors, including the health of the economy, global conflict and interest rate decisions. More recently, share prices have been affected by conflicts in Europe and the Middle East, as well as persistent inflation.

Global share markets have seen many ups and downs in the past 25 years

The chart below shows how global share markets have performed over the past 25 years.

So what does all this mean? Should you switch investment options in search of a better outcome?

To help answer the question, let’s look at what happened during the COVID crash of 2020.

According to a study by Griffith University and financial services company IRESS, the number of Australians switching their super investment option tripled during the pandemic.¹

For some, these switches did help to protect their savings from the worst of the
downturn. But in more than 50% of cases, people who switched into a new
investment option were left financially worse off than if they’d done nothing
at all.

The study also found that people who moved their super into cash when the market was falling missed out on gains when the market rebounded.

If you decide to switch your investment options during a market downturn, the next decision you'll have to make is when to switch it back, which comes with its own risks. In other words, that’s two decisions you’ll need to time perfectly. And trying to ‘time the market’ can be as random as flipping a coin – getting the result you want usually comes down to luck.

When there's volatility in the market, often the best thing to do is nothing. It’s important to remember that super is a long-term investment, which gives funds like Hostplus time to recover from short-term downturns.

Our investment strategy has delivered excellent long-term results for our members through the following factors.

Diversification

We don’t just invest in share markets. Instead, we invest our members’ money
across many different assets including bonds, cash, property, infrastructure,
private credit, and more. This means that a bad day on the market will
typically only affect part of your portfolio, helping to preserve your savings.

Active management

Our fund managers can make changes to our holdings as market conditions change. Sometimes this might be to protect against possible losses, other times it might be to take advantage of an upcoming opportunity. In either case, this
active approach aims to deliver superior returns over the long term.

Scale

As one of Australia’s largest super funds, Hostplus can invest in large
unlisted projects that smaller funds don’t have access to. This gives us more
ways to diversify our portfolio and generate returns for you.

Our default Balanced (MySuper) option is a top performer over the long term, which speaks for itself.² And we’re proud to have you with us at Hostplus. 

Need help choosing an investment option? Read more on the factors you might need to consider. Or, explore our educational videos.

We also offer members a range of financial advice tools to help you make appropriate investment choices. Whether you choose the convenience of a phone appointment, opt for a more personal approach with a face-to-face consultation, or want to do it yourself with SuperSmart, our innovative online advice tool, we have financial advice and planning options to suit your needs. 

Contact us on 1300 303 188, email us, or book a callback today.