In some ways, investing in super is not unlike competing in a marathon. Both run their course over a long time, with ups and downs along the way. Quite a deal of patience and staying power is needed to make it to the end, where the results of all the hard work make the final payout worthwhile.

In the past few months, the effects of the sub-prime market issues in the US have been felt in both the Australian and global sharemarkets. This is because the resulting defaulting loans caused some big investment banks to sustain large losses. This in turn has made investors nervous which has caused increased overall volatility.

A sub-prime mortgage is one where the borrower has a lower than average credit rating. This means they often find it difficult to secure a conventional loan. Higher interest rates are also generally charged to these borrowers because they are a bigger risk to lenders. In 2006, the US saw a sharp rise in the number of foreclosures on these types of loans. This impacted the US economy, which in turn affected the rest of the world.  

Like long distance runners, it is important to stay focused on your long-term goals when markets are jumping about all over the place. When reviewing your super returns, make sure you look at the returns over the last 5 to 10 years. Looking at single year returns does not give an accurate picture of how your money has been working for you over time, or how it is likely to be invested.

It is also important to remember that you will probably not be able to withdraw your super for perhaps up to 20 or 30 years. This means you have plenty of time to make back any short-term losses and grow your account over the long term.

Even those who are close to retirement may have a longer investment horizon than first thought – particularly if they continue to invest the bulk of their account throughout retirement.

Having said all this, it is important to review your personal investment needs every now and again to ensure they remain right for you. Any changes should be made with your long-term goal in mind; and not as a knee-jerk reaction to the recent volatility.

Remember, any losses you see are only paper losses. They only become actual when a withdrawal is made.

When markets are down there is an excellent opportunity to buy good quality shares at bargain basement prices. This is what GuildSuper and its investment managers will be doing to ensure the Fund’s continued long-term growth.

The other good news is that over the last 10 years, the sharemarket has made considerable money for those who held their nerve and stayed invested through both market ups and downs.

The table below shows that while the markets suffer dips every so often, overall they tend to grow considerably over time.

Like marathon runners, it is advisable to persevere and ride out this difficult period.  The elation felt upon reaching the finishing line will make any short-term pain a distant memory.

GuildSuper
Phone: 1300 361 477
Facsimile: 1300 309 959
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