Guest publication in “Ask an Adviser” May 2020 edition

I get asked to write for Adviser Ratings in the “Ask an Adviser” section from to time to time, where anyone can ask a question and I will be answering them. This one was a question asked by a Kate from Fremantle about the positives of a pandemic. The original article was published here. As […]

I get asked to write for Adviser Ratings in the “Ask an Adviser” section from to time to time, where anyone can ask a question and I will be answering them. This one was a question asked by a Kate from Fremantle about the positives of a pandemic. The original article was published here.

As a young person/mid lifer accumulating super and whose retirement is some way away…  What are the positives of this market fall and how can I ensure I am positioned to benefit from the growth post COVID 19?
Kate in Fremantle

Top answer provided by: Nicole Niu

Hi Kate,

From your question I am going to assume that you have decent knowledge around the market and economic cycle and you worry more about your super not growing fast enough than losing money in the short term, in general.

If you are employed and not on JobKeeper payment, the best course of action is to just stay put. This is because your employer would still be making superannuation payment into your fund, and when the cash hits your super fund, the fund will be buying investment assets at fire-sale prices due to people panic selling them. Your age is a bonus as you would have more years to ride out the market corrections and for the investment to compound (look up “compound interest” on MoneySmart.gov.au).

If you have the capacity, you could consider making additional super contributions, as young as possible, to capture the low prices while you can and to compound even more – please speak to a financial adviser and make sure you do it right. People make the wrong type of contribution a lot more often than you think and can end up being worse off financially than before.

For someone like yourself, I would also encourage you to pause a minute and think about the nature of money if you haven’t yet done so.

Our currency, the Aussie dollar, is a commodity, acting in the same way other commodities do. If you mass-produce it, the value of it will be diluted. Money can be produced by a central bank, in our case the Reserve Bank of Australia. In the current climate, the Reserve Bank has already had to (digitally) print Aussie dollars, and lend them to the Federal and State government for them to use towards the economy.

What this means to you is that the cash you are holding now in your bank account would worth a little less next year, and the trend would continue for many years. We don’t have many choices other than riding with it and finding ways to grow your money more than it loses its value. It might sound simple but it’s not, especially now as we don’t know what the current situation would do to our pre-COVID-19, low inflation, low interest rate and low wage growth economy. My guess is that beating inflation would become increasingly difficult as we wake up from over a decade’s almost uninterrupted growth, and you certainly can’t hold on to the traditional “safe” investment assets for too much longer.

Hope this helps and I am available for a chat if anyone is interested.

Discover your Financial IQ and what it means for your future.

Take our short, 5-question quiz to discover how your Financial IQ will impact your future…

Discover how to be prepared financially for any unexpected events that life can throw at you

Spot the hidden “money traps” that are destroying your financial security

Learn how to improve your monthly cash flow without getting a raise

In 10 years, a $1000 savings account with a 2% annual interest will have:

A
B
C

A house worth $1,000,000 with an $800,000 mortgage is:

A
B
C

How do you think the age pension from the government will change over time:

A
B
C

Insurance is:

A
B
C

In one year, the value of a savings account with 1.5% annual interest and a 3% inflation rate will:

A
B
C
Post thumbnail

8 Steps to Achieve Financial Freedom in Australia

The holy grail of most people’s wealth-building goal is to achieve financial freedom. Financial freedom, or financial independence, is the status of having a dependable cash flow to pay your living expenses for the rest of your life without having to be employed or dependent on others. Just about everyone wants to achieve financial freedom […]

Post thumbnail

Best Passive Income Ideas 2021

As a working professional in Australia, your ultimate dream in life is to build wealth that doesn’t eat up your time, and use it to do all the things you really love – retire early, spend quality time with your loved ones and travel the world. Today I’m gonna let you in on a little […]

Post thumbnail

AIA Vitality program changes (updated Nov 2020)

About the most recent changes AIA routinely modifies the way they reward members who are committed to improving their health and making healthier choices, and here is the most recent AIA Vitality update. Here is the official Point Guide:

Post thumbnail

How to Invest in Gold in Australia

Gold has a rich history. Long before paper money and credit cards, gold was used as a form of currency and a symbol of wealth. The first use of gold as currency occurred in the late 8th century BCE. We’re in the 21st century, and the yellow metal still plays a vital role in the […]

Post thumbnail

Calculator: How much you need to retire comfortably?

When you can retire in Australia You could retire at any time and any age in Australia, as long as you have sufficient income to support your ideal lifestyle. For most of us, the most efficient way to achieve our retirement income goal is by building investment assets generating enough passive income. And you would […]