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The Experts

What would happen to your super if the US market crashed?

The Experts
Thursday, January 18, 2018

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Ever wondered what would happen to your share of an industry super fund if the overseas market experienced a crash? 

That was the query put forward recently by one curious listener on 2UE’s ‘On the Money’, who asked money expert Paul Rickard to explain how his balanced fund would be affected should things turn sour in the US.

A balanced fund means 60%-70% of the assets are invested in growth assets while the remaining 30%-40% of your funds are invested in assets that largely won’t increase in price but will pay income.

Income assets include things like government treasury bonds, low risk property, and infrastructure assets with a steady income. The growth component of the fund offers exposure to both the Australian and overseas markets, as well as commodities and property. 

“Weighing all of that up, in a typical balanced fund, about 20-25% of it would be invested in overseas equities and shares, with probably about half of that in the US market,” Rickard explained.

“If the US market has some sort of a problem … roughly half of your total investment would then be impacted by a big movement in the US share market”, Paul said. 

A good example of just this is the 2008 GFC, where the Australian share market saw losses of 25-30%, and super funds with high exposure to shares were particularly vulnerable to this. 

While the best long-term investment returns can be found on the stock market, with higher returns comes a higher risk. 

To listen to the full answer, click on the interview above.

Published: Thursday, January 18, 2018

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