Markets rise and markets fall. This is the nature of regular market cycles. Sometimes when markets have a period of sharp falls in the short term, people forget about the long-term picture and get tunnel vision, focussing only on the short-term negativity.
But you don’t need to do that with super. It’s your long-term investment, and THAT’s why you need to carefully consider decisions regarding your super, whether its consolidating funds, opting into insurance, or determining your risk tolerance. Let’s look at what can make investing in super benefit over the long-term.
Super benefits from the compounding effect of returns
Whether it’s 10, 20, 30 or maybe 40+ years until you plan on retiring, your super account is there, accumulating from every employer and voluntary contribution that you make. The beauty of compounding returns is that as your balance grows, your entire larger balance stands to benefit from positive market returns over time. There may be times in your career where you choose to make voluntary contributions, and this will keep ticking your super balance higher. With Raiz Rewards you can make voluntary contributions from your everyday shopping into Raiz Invest Super.
Consolidating your super could save you multiple fees over the long-term
It may seem like a small amount to start, but paying multiple super fees could erode your balance over time, and over many years the compound effect of this amount could become an unnecessary cost to your future nest-egg.
Super benefits from regular contributions
If you are employed, you are making contributions all the time when you are working. In the financial year starting July 1st 2021, the law states that 10% of your pre-tax income goes into your Super. Because many of us are making regular contributions into super that are being invested, it means you are investing at different stages of the market cycle.
If markets are falling, your investments are taking place at lower levels, meaning you are effectively Dollar Cost Averaging into the market. Over the long-term, this can be an effective way to invest, as you may invest at some low periods and then again at some high periods. When markets start to rally, your entire portfolio could benefit from market returns including the investments made at the low of the cycle.
The beauty of your super contributions is that they happen without your direct input, taking a fair bit of the decision making and emotion out of the equation.
Most of us can’t touch the majority of our super until we retire
The burden of lockdowns took its toll on many Aussies in 2020 and 2021, some of whom chose to withdraw up to $10,000 from their super balances for financial hardship. But for most Australians, they are unable to touch their super until retirement age. This means that your super portfolio stands to get all the benefits that come from the power of compounding and frequent investments from wage and salaries, without starting the process over again should you have been able to continuously withdraw.
Super shouldn’t be a daily source of panic, it’s there for the long-term
Some investors become understandably uncomfortable if markets fall. But that could be for a period of days or weeks. Your super is going to be invested for years and years. That means there are potentially thousands of days for markets to recover and for your super investments to grow. It is too easy to see a negative market and think about its effect on your investments. But super should be one asset class where you take off the short-term lenses and put on your long-term retirement silver-hair spectacles 😉
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