Everyone’s risk-tolerance, the time frame they have for judging investment performance, and investment goals is unique. There is no such thing as a ‘one-size fits all’ answer on how to manage a market downturn.
Seeing the value of investments, including superannuation accounts, go down is distressing. People’s long-term goals and dreams are often tied up with their investments that in many cases have been built up over years.
What we know from past severe market falls, is that they do eventually end, and recoveries follow. But it does take time.
The 2008/09 Global Financial Crisis (GFC) is the most severe investment downturn in recent memory. It was upsetting for people to see the value of their investments go down. However, the GFC did end and was followed by 10 years of strong share market returns.
That’s why people who change their investments immediately after a correction, are taking losses, which reduces their chance of making their money back when markets eventually recover.
That said, every severe market episode is different, and the time it takes for markets to recover can vary.
There is more uncertainty this time because this market downturn was set off by a dangerous global virus. Progress in combatting COVID-19 is key to shifting investor moods.
Investors will likely remain edgy until the worst point of the pandemic is passed, and until improved treatments to better manage COVID-19 emerge. The appearance of a vaccine available for widespread use would be especially welcome by everyone, including investors.
Above everything else, we recommend you discuss your circumstances and investments, including super, with your financial adviser. If you do not have an adviser, please call us.