You would have to be living under a very large rock to not know that share-markets around the world (including Australia) are taking a major hit right now and as a result so are most people’s retirement strategies. So what can you do?

First of all being nervous, concerned, even a little freaked out is a normal response to these unusual and unprecedented circumstances, but remember the decisions you make today may have long term consequences. How would you feel if you pull your money out of the market when it is low, just to watch it bounce back again in a couple of days/weeks/months?

The most sensible advice is not to make any decisions in a moment of panic or when the market is going up and down so quickly. By converting your shares to cash now you make the loss real and it’s hard to recover it if you are not in the market when it rebounds. However, if the investment stays in the market, future capital growth will happen when things settle down. At ActonAdviceGroup we use a rainwater tank analogy to ensure your investments are in the right place at the right time.
If you look back through history, it is clear that the markets do recover from shocks like this. Clearly the past cannot predict the future, and no one knows how or for how long investors will continue to react the way they are, but it does tell us that recent events are far from unique. The coronavirus issue is one thing, but the oil price war is also adding some volatility to the market.

Financial traders who worked during the recessions of the early 1980s and the Global Financial Crisis in 2008, said that they saw similar patterns of panic selling in the markets during these times. They also said that given time the markets recovered.
If you are close to retirement here are some things you should think about.

  • Don’t become fixated on your account balance – we all get a little unsettled when we see our balance drop, but making a decision when you are in this frame of mind is generally not going to end well.
  • Understand the mix of investments you have – it might be a good time to get this reviewed by a financial adviser and discuss your allocation and what is happening in the market and how long you have before you really need your money.
  • Are there other ways you can add to your retirement nest egg – can you make greater contributions to your superannuation or set up a simple savings plan?
  • If you still have a mortgage – can you refinance to make your repayments lower? Where is the best place to contribute any additional savings? The same applies to all forms of insurance that you carry – when last did you assess your insurance coverage and is it still suitable for your needs?
  • Get the right advice – we all have those friends that know it all, but in this case they are probably not the ones to listen to.

In the end, it comes down to having the right mix of investments. Even if you are getting close to retirement it is always a good strategy to review your investments and this is where your financial adviser can help you.