Market volatility and your super

What is market volatility?

Market volatility is a term used to describe the ups and downs in the value of investment assets. The value of any asset – whether it’s shares, property, bonds, or commodities like gold – can fluctuate over the short-term, sometimes wildly.

While all asset types can experience volatility, it’s most commonly linked to share markets. That’s because share prices can fluctuate over days, weeks, or months. However, despite these fluctuations, share markets have historically shown steady long-term growth.

The causes of market volatility are many and varied. Economic or geopolitical factors, like interest rate changes, inflation, trade disagreements, natural disasters and conflicts, can all impact financial markets and result in volatility.

Covered in this article:

• What is market volatility?
• Volatility and your super
• Market cycles
• Taking control of your super

Volatility and your super

As a superannuation member, your super balance is typically invested in various asset classes and financial markets – and volatility is unavoidable. So don’t be alarmed when your balance drops from time to time.

Bulls and bears and market cycles

Markets move in cycles, from lows to highs and back again. A full market cycle can typically include both a “bull market” and a “bear market”, with peaks and troughs in between. 

Time in the market vs timing the market

Market cycles are unpredictable, and each stage generally only becomes clear in hindsight.

That’s why it’s so difficult, and risky – even for seasoned investors – to try and time the market by buying and selling assets at just the right time. As a super member, you’re likely to remain invested for decades, and “time in the market” has been shown to be a much safer strategy than “timing the market”.

That’s because time often negates the effects of short-term market fluctuations – history shows market values tend to increase over longer periods, despite the ups and downs. For example, the ASX 200 has grown by more than 220% over the past 20 years, despite major volatility events such as the global financial crisis in 2008 and the COVID-19 pandemic.

Spending time in the market carries the added benefit of compounding returns over many years. Perhaps the biggest advantage of taking the longer-term view, is that it helps investors resist rash decisions and instead rely on the market to deliver sustainable returns over the long-term. 

We’re looking out for you

Mercer’s global investment analysts, researchers, economists, asset class specialists, and portfolio managers are constantly monitoring markets to identify the most important developments and potential opportunities.

We offer single-sector and diversified investment options – including our life stage investment option Mercer SmartPath® – and our experts actively manage portfolios to capture opportunities when markets are rising and help cushion your super balance from the worst when markets are falling.

Check before you switch

Switching investment options in response to market volatility can have a significant impact on your super account balance when you retire, so it may be worth talking to our financial advice team, or an independent licensed financial adviser, before deciding.

Mercer Super members have access to our dedicated advice team, at no additional cost. They can provide you with tailored financial advice over the phone regarding your Mercer Super account, including which of our investment options may be right for you.