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UNDERSTANDING THE RISKS OF SWITCHING

Negative news headlines make us all feel uneasy and it’s natural to question the
impact these events may have on your super. In times of uncertainty, remember,
super is a long-term investment. While it can be tempting to switch options,
staying invested in a diversified portfolio may often be the best action you can
take.

Market uncertainty is sometimes triggered by changes in economic outlook and
global events. Significant events can restrict growth, but it’s important to
think long term. Market ups and downs are a normal part of investing.


CHANGING MARKET CONDITIONS

When markets are rising, you may have concerns you are missing out. When markets
are falling, you may feel anxious about potential losses. This is understandable
and it can be hard to sit tight and not take immediate action.

When markets go down, we often speak to members who are considering switching
from a diversified investment option, such as AustralianSuper’s Balanced option,
to a cash option. Many members think this is a safer place to be, but you could
be locking in investment losses that may be harder to recover from when markets
bounce back. A short-term view can have a long-term negative impact on your
final retirement balance.


LOOK PAST MARKET TURBULENCE

Looking past market turbulence can be challenging. But history shows that
markets increase in value over the long term. By staying invested in a
diversified portfolio your super has more opportunity to benefit when markets
recover.

Members who stay invested in diversified portfolios can end up in a better
position in the long term, compared to those who switch investment options. The
below examples highlight this.


HISTORY SHOWS THAT MARKETS BOUNCE BACK

Despite short-term ups and downs in the market, members' super has grown over
the long-term. Overall, staying invested has resulted in a good outcome.


AUSTRALIANSUPER BALANCED OPTION – LONG-TERM PERFORMANCE OVER 20 YEARS

The chart below shows the performance of the Fund’s Balanced option over 20
years, from 30 September 2003 to 30 September 2023. It uses a starting balance
of $100,000 and shows how – over 20 years – that balance has grown to $462,176.

AustralianSuper investment returns are based on crediting rates, which are
returns less investment fees and costs, transaction costs, the percentage-based
administration fee and taxes. Returns don’t include all administration,
insurance and other fees and costs that are deducted from account balances.
Returns from equivalent investment options of the ARF and STA super funds are
used for periods before 1 July 2006. Investment returns aren’t guaranteed. Past
performance isn’t a reliable indicator of future returns.


INVESTING FOR THE LONG TERM

The Balanced option, where most members are invested, has generated a 10-year
average return of 8.04% and a 20-year average annual return of 7.95% as at 30
September 2023. This performance result includes investing through economic
downturns like the Global Financial Crisis and the COVID-19 pandemic, while
continuing to provide long-term growth for members.


> If a member had invested in AustralianSuper’s Balanced option over the 20
> years to 30 September 2023, they would’ve more than quadrupled their
> investment.


CASE STUDY: MEMBERS WHO SWITCHED INVESTMENT OPTIONS

Below are two hypothetical examples that demonstrate the difference between
staying invested in a diversified option (the Balanced option), compared to
switching to the Cash option. The time period covers the March 2020 market
downturn, which was brought about in part due to the start of the COVID-19
pandemic.

In each scenario the member invested in the Balanced option from 31 December
2019.


CLAIRE – SWITCHED TO THE CASH OPTION FROM THE BALANCED SUPER OPTION

Claire is 56 and on 31 December 2019 she had a balance of $350,000 invested in
the Balanced option. On 23 March 2020, Claire decided to switch from the
Balanced option to the Cash option. Her concerns about the market sell-off
fuelled this change. Claire stayed invested in the Cash option until 30
September 2023. The chart below shows the growth of Claire’s super in the Cash
option, compared to the Balanced option. If Claire stayed invested in the
Balanced option, her balance at 30 September 2023 would’ve grown to $425,286.
Instead, by switching to the Cash option, she ended up with a balance of
$309,264. Switching and staying in Cash left her $116,022 worse off than if she
stayed invested in the Balanced option through this period.

AustralianSuper investment returns are based on crediting rates, which are
returns less investment fees and costs, transaction costs, the percentage-based
administration fee deducted from returns from 1 April 2020 to 2 September 2022
and taxes. Investment returns aren’t guaranteed. Past performance isn’t a
reliable indicator of future returns. Doesn’t include all administration and
other fees and costs that are deducted from account balances.



BEFORE SWITCHING INVESTMENT OPTIONS

If you’re considering making a change, talk to a financial adviser. They can
help you make the right investment choices for your personal goals and risk
appetite. A financial adviser can also guide you when investment markets are
bumpy, providing reassurance. This could help you stay focused on the long-term
and ease any worry you may have.



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