Why Does the Value of My Super Fund Go Up and Down?

If you check your super balance regularly, you may notice something that feels slightly rude.

It does not always go up.

Sometimes your balance rises. Sometimes it falls. Sometimes it does both in the same year, like a caffeinated elevator.

This can be unsettling, especially if you are close to retirement or already relying on your super for income.

So why does your super balance move around, and what can you do about it?

Start with how your super is invested

Most super funds invest across a mix of assets.

These may include:

• Australian shares

• International shares

• Property

• Infrastructure

• Fixed interest

• Cash

The exact mix depends on your investment option.

A growth option will usually have more exposure to shares and property. A conservative option will usually have more exposure to defensive assets such as cash and fixed interest.

The more exposure your super has to growth assets, the more likely it is to move up and down in the short term.

That is not necessarily bad. Growth assets can help build wealth over time. But they can also bring volatility along for the ride, wearing tap shoes.

Why share prices move

Shares are a major reason super balances fluctuate.

When your super fund invests in shares, it owns pieces of companies. The value of those shares changes depending on what investors think those companies are worth.

In simple terms, investors look at what a company may earn in the future.

If a company is expected to grow profits strongly, investors may be willing to pay more for its shares. If expectations fall, the share price may also fall.

But company profits are only part of the story.

Share prices can also be influenced by:

• Interest rates

• Inflation

• Employment data

• Global events

• Government policy

• Investor confidence

• Industry trends

• Company leadership changes

  
  

Markets do not just respond to what happened. They respond to what investors think may happen next.

That is why share prices can sometimes move in ways that seem confusing.

A company can announce a profit and still see its share price fall if investors expected an even better result.

Opinions matter

Markets are not controlled by one neat spreadsheet.

They are influenced by millions of investors, analysts and institutions forming views about the future.

One investor may believe a sector is set to grow. Another may believe it is about to shrink. One may see opportunity. Another may see risk.

The market price reflects the combined view of all those buyers and sellers at a point in time.

Your super fund’s balance then reflects the changing value of the investments it holds.

Why your investment option matters

Your investment option plays a major role in how much your super balance moves.

A high-growth option may rise more strongly during good market periods, but it may also fall more during downturns.

A conservative option may provide a smoother ride, but it may deliver lower long-term returns.

Neither is automatically right or wrong.

The right option depends on your goals, age, retirement timeframe, risk tolerance and financial situation.

If you are young and have decades until retirement, you may be more comfortable accepting short-term volatility in exchange for potential long-term growth.

If you are close to retirement, you may want to reduce the risk of large short-term falls.

What can you do?

The first step is not to panic.

A falling super balance can be uncomfortable, but reacting emotionally can cause bigger problems.

Selling growth investments after markets have already fallen may lock in losses and reduce the chance of participating in any recovery.

Instead, focus on what you can control.

1. Check your investment option

Make sure your current investment option still suits your timeframe and comfort with risk.

2. Understand diversification

Diversification means spreading your money across different types of investments. This can help reduce the impact of one poor-performing asset or sector.

3. Keep perspective

Super is usually a long-term investment. Short-term movements are normal.

4. Get advice before making big changes

If market movements are making you anxious, speak with a licensed financial adviser before switching investment options.

Stay focused on the long term

Super balances will move up and down.

That is part of investing.

The key is making sure your super is invested in a way that suits your life, not just today’s market mood.

If you are worried about your super balance, or if you simply want to check whether you are still on track, a financial adviser can help you review your position and make informed decisions.

Markets will keep moving. Your strategy should be built to travel further than the next headline.