Expect a loss of between 5 and 15%

The 2021-22 financial year has not been great for investing.

  • The Australian share market has fallen 11%.
  • The US share market has fallen 9%.
  • The Nasdaq (which includes the US tech stocks) has fallen 17%.
  • Australian property has increased by 15%
  • Australian bonds have fallen 7%

As you can see, if you were heavily invested in Australian property you will have done well. For now!

However, a lot of your super is invested in shares. When you check your super balance you will be unpleasantly surprised at how much it has gone down. Do not panic!

Super is just a tax haven

Super is not an actual investment. It is just a Government sanctioned tax haven – that most people do not use as effectively as they could.

When you put your money into super, whether you know it or not, you choose a specific investment option. If you do not nominate one, the super fund will do it for you. The one they choose will have a mix of assets including shares, property, bonds, and cash.

It is these individual assets that are your real investments.

Investments are volatile

The price or value of assets like shares and property goes up and down. We call this volatility. Will their prices fluctuate on a daily basis, they generally give negative annual returns every three or four years.

The trade-off for investing in something with volatility is you get higher long-term returns than you would by putting the money in a term deposit.

To illustrate In the last 20 years, cash has given annual returns of 3.5% and Australian Shares annual returns of 8.7%.

To put this into perspective, if in 2002 you invested $500,000, twenty years later you would have $994,000 if it was invested in cash. Compare this to the $2.65 million you would have if it was invested in Australian Shares.

How long will it last

The average bear market (this is what they call it when markets are going down) in shares lasts around 12 months. The longest was 2 ½ years and the shortest was 33 days. While there will be lots of people predicting how long this one will last, no one really knows.

Timing the market is nearly impossible

It is incredibly hard, if not impossible, to reliably pick the bottom (or top) of the market. There are some people that get it right sometimes, but they can’t continually do it.

Research from the US shows that missing the days where the market went up the most has a big impact on your returns. It showed that if you invested $100,000 in US shares in 1998, by 2018 you would have had $298,450. However, if in this time you tried to time the market and missed the 10 days with the highest returns, you would only have had $148,950.

What’s more, nearly 50 percent of the days with the best returns happened in bear markets.

Do not try and pick it.

This is an opportunity

In times like this it is important to change your thinking.

Instead of thinking it is all doom and gloom, look at it as an incredible opportunity. It is only once every three or four years that you get the chance to buy shares in the top companies at a 10-15 per cent discount to where they were 12 months ago. It is sale time!!


Super is a long term investment. Do not panic when the market falls. Instead, use it as an opportunity to put more in.

I specialise in helping people make the most of their money, and part of that is making sure they are getting the most from their super and investments. If you want to discuss yours, book a chat via the button below or contact us on 0417 034 252 or at office@constructwealth.com.au.

About the Author
Phil Harvey is an independent financial adviser. In 2017 Phil set up his company Construct Wealth to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers and a tax financial adviser, registered with the Tax Practitioners Board.

General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)

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