Tue 06 Nov, 2018
How to Protect Your Super From a Market Crash
The Global Financial Crisis of 2007-2008 really shook the Australian superannuation industry. Many sat back as they lost their entire retirement savings, realising it was too late to take the measures needed to protect their super. Now, 10 years later, the stock market is yet again plunging to nerve-wrecking lows, causing anxiety and worry to investors across the nation. And for Aussies who have invested in stocks with their super, that could mean another hit for their retirement savings. But, what if you could take precautions now, to protect your super from a market crash in the future?
Despite the fact that a stock market crash is something out of your control, there are still measures you can take to keep your super well protected from the unexpected. So, in this blog we’ll discuss three ways you can keep your super protected from another stock market crash.
3 Ways to Protect Your Super From a Stock Market Crash
1. Diversify Your Portfolio
A diversified portfolio is a great way to protect your super from a stock market crash. Diversifying your portfolio basically means not putting all of your eggs in one basket, or all of your super into one asset. To make sure your super is well-diversified, invest in assets other than stocks, such as term deposits, property, or previous metals such as gold and silver.
It’s also important to make sure the stocks you are investing in are diverse. In other words, don’t invest heavily in one company’s stock, or in just technology stocks. Diversifying your stock portfolio with different companies and industries will help manage risk and reduce the volatility of your portfolio.
Making sure your portfolio is diversified in both the assets and stocks it invests in can help keep your super protected from experiencing a huge drop in value if the stock market crashes.
2. Choose Low Risk Investments
Another great way to protect your super from a stock market crash is to choose low risk assets to invest in. Instead of investing a portion of your super in stocks, choose fixed-interest assets such as term deposits or bonds.
Investing your super in a term deposit can be a great way of mitigating your fund’s risk, as there’s almost no risk of losing your money in any kind of crash. You can have piece of mind knowing exactly what interest rate your fund will be receiving, and knowing that the rate will not change over the selected period of time. However, it’s important to remember that while term deposits are a safer option for your super, they won’t pay a very exciting rate of return like stocks sometimes can.
3. Take Control of Your Super with an SMSF
Taking the reigns from your fund manager and self-managing your fund is another way to protect your super from the unexpected. With an SMSF, you are in complete control of how your super is invested. This means you are the one choosing what to invest in, how much to invest in certain assets, and when to sell the assets to make a profit. You will also have more investment options to choose from, meaning more opportunities to diversify your portfolio and invest in lower risk assets.
If you self-manage your super fund with Squirrel, you will have full access to your fund 24/7. This can help you still invest in stocks while keeping your super well-protected from a crash. With 24/7 access to your super, you can see how all of your investments are doing in real time and make adjustments easily, from anywhere. In other words, you can sell stocks that aren’t performing well immediately, instead of waiting 3-5 business days on your fund manager to get back to you.
Having more control over your super with an SMSF can help you protect your super from the unexpected while still investing in the assets of your choosing. It is your retirement savings after all, and you don’t want to wake up to another stock market crash that’s wiped it all out in a matter of days.