Amid ongoing market volatility, should Australians reconsider common assumptions about their superannuation?
As in response to rising geopolitical tensions – including renewed tariff threats impacting global trade and supply chains – Australians are re-evaluating their superannuation strategies amid concerns about economic uncertainty.
With over invested in super, Australia’s retirement savings system is deeply tied to market performance. But recent volatility has reignited long-standing debates about how much attention Australians should pay to their super – and what actions, if any, they should take when markets become unstable.
For example, Australians are wondering whether it’s wise to move their super into cash when the market dips, and younger people are asking themselves if they should ignore their super until later in life. And are self-managed super funds really safer or more flexible than traditional options?
Associate Professor Mark Humphery-Jenner from the School of Banking and Finance says, “Superannuation is for the long term. Do not panic when there is a downturn. It is one of the few tax-effective savings vehicles in Australia.”
Together with Associate Professor Anthony Asherfrom the School of Risk and Actuarial Studies atʹڲƱ Business School, A/Prof.Humphery-Jenner unpacks six common superannuation myths – offering views on what’s fact, what’s fear, and what Australians should consider in a changing investment landscape.
Myth 1: Stock markets always recover
A/Prof. Asher says many Australians rely too heavily on the belief that stock markets always recover – an assumption he says may not hold in the decades ahead.
“Australians believe that stock markets always recover and outperform other investments, particularly bonds. Recent research casts doubt on this.
“Based on historical metrics, it is unlikely that the next few decades will be as good as the past.”
A/Prof. Asher says superannuation funds are holding more savings than there are productive investment opportunities available in Australia – a challenge that’s also playing out in other countries.
“The weight of savings in superannuation already exceeds the supply of available investments in Australia – and the same is true in many other countries, including the USA,” he says.
A/Prof Humphery-Jenner says that it is important to diversify your portfolio. “Markets often trend upwards. However, you do get some markets that can remain at depressed levels for extended periods of time.
“An example is Japan. Its market has only recently reached the levels initially seen in the 1990s. During that time, it has had periodic recoveries and lulls. For example, it had a protracted downturn from 2007, taking a decade to recover. While Japan’s economic situation is materially different from that of the US, it illustrates that markets can struggle for protracted periods.
“This is why it can be important to diversify across markets: we do not know in advance which markets will definitely outperform or underperform.
“Investors should also be cautious about ‘catching a falling knife’: it is impossible to know in advance when the market will bottom,” says A/Prof Humphery-Jenner.
Myth 2: Be more conservative when stock markets are volatile
When markets are volatile, a ‘defensive’ approach can make sense, says A/Prof. Humphery-Jenner.
“However, people should be cautious of moving allocations too rapidly or locking in their losses and missing out on the rebound,” he says.
Both academics highlight that it is usually too late when individuals decide to move their portfolio to a more conservative market.
“Whenever you change your allocation, you will face fees. And, if you sell after the market has fallen, it might already be too late. Rather, it is important to take a long-term approach,” says A/Prof. Humphery-Jenner.
While A/Prof. Asher agrees with A/Prof. Humphery-Jenner, mentioning that it has historically been a good idea to be more conservative when markets are more volatile, he says that people who are older and are closer to retiring should be more conservative.
“It is probably a good idea to be more conservative when you are getting older. But investing is complex, and it’s best to leave it to the professionals.”
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Myth 3: Self-managed super funds are the safer option
While are often viewed as a flexible alternative, both academics caution that they are not inherently safer – and may in fact carry more risk, particularly for those without the right knowledge or time to manage them.
“Certainly not safer,” says A/Prof. Asher. “In particular, SMSFs are more vulnerable to fraud. They can offer opportunities to small business owners, but otherwise are probably best avoided.
“Given that SMSFs are normally serviced by small companies or even sole traders, it is much more difficult to monitor them, and thus to provide compensation if something goes wrong,” says A/Prof. Asher.
He also says that informed investment requires intensive research and a strong foundation in accounting, economics, and investment management. “It is not true that anyone can invest well with minimal effort.”
A/Prof. Humphery-Jenner agrees that SMSFs can be riskier for some investors but says they can work for experienced and disciplined investors.
“SMSFs can be safer if you are disciplined and know what you are doing. But if you are not familiar with markets, are concerned you might panic sell, and are not familiar with risk management, they can be quite risky.
“For example, suppose you establish an SMSF and simply invest in exchange-traded funds (ETFS) that track the S&P 500 and ASX 200 – then it will be relatively lower risk than many other options. But you must still manage your portfolio, decide on the allocations, manage foreign exchange risk, and exercise discipline.”
He says problems often arise when investors try to pick stocks, borrow to invest, or accrue high fees – sometimes as a result of poor financial advice. “SMSFs are best treated with caution,” says A/Prof. Humphery-Jenner.
Myth 4: I’m young, so I don’t need to think about super yet
Many younger Australians assume that superannuation is something to worry about later in life – but both academics say starting early can have a significant impact.
“Young people definitely should consider their superannuation,” says A/Prof. Humphery-Jenner. “Superannuation compounds over time. People often underestimate how much compounding matters.”
He says balances can grow substantially over time. “If the stock market grows at around 10% per annum, $450,000 today can become $3 million after 20 years of compounding.”
A/Prof. Asher cautions against high return expectations but keeping costs low is important. “Most people will eventually retire – and they will have to rely on their super. Selecting a good super fund is extremely important.”
He also says there other benefits for younger Australians, such as using super to save for a home deposit through the First Home Super Saver Scheme, or accessing life and disability insurance through their fund.
While the impact of market fluctuations may seem less relevant when retirement is decades away, A/Prof. Humphery-Jenner says the long-term nature of superannuation means younger Australians should avoid knee-jerk reactions. “Rather, focus on your long-term saving goals and be cautious about switching investments too rapidly.”
A/Prof. Asher says that people contributing to superannuation are buying shares so they can benefit from lower prices.
Myth 5: You are stuck with your employer’s superannuation fund
Many Australians assume they must use their employer’s nominated super fund – but that’s not the case according to ʹڲƱ experts.
“You control where your superannuation is invested,” says A/Prof. Humphery-Jenner. “Your employer’s default fund is only a suggestion. If it doesn’t suit your needs, you can move.”
He says that while switching funds is possible, it’s important to consider the potential costs. “Moving super funds can involve implicit fees, so always read the fine print. And remember – all funds can underperform at times, so don’t base your decision on past performance alone.”
Instead, he says individuals should focus on their own financial goals and risk preferences. “Think about the asset mix and fund structure that’s right for you, not just what’s been chosen by your employer.”
Myth 6: Annuities are a poor investment
According to A/Prof. Asher, it is commonly believed that lifetime annuities–financial products that provide regular income for the rest of a person's life in exchange for an upfront lump sum– give poor value for money.
A/Prof. Asher says that shows this comes from seeing lifetime annuities as a strange investment where money is lost when you die. “A better way is to see them as plans to ensure you have money to live on for as long as you live. Couples can take lifetime annuities that pay as long as at least one partner is alive,” he says.
Lifetime annuities will always allow a higher standard of living than account-based pensions with the same underlying investment, says A/Prof. Asher. “If you ignore bequests to children, they are a better deal. They actually offer insurance for yourchildren – from having to support you financially if you live a long life,” he says.
