Changing course: how to steer your career in a new direction
Falling out of love with your career? Perhaps it’s time for an about-face.
Markets are influenced by many things: industrial, economic, political and social factors can all play a part. For instance, global trade and production affect economic growth, while consumer and business confidence affect spending – and therefore company profits.
Poor political and fiscal decisions in some countries can even have a flow-on effect in other countries they owe money to. And of course, natural disasters can cause major damage to any economy with no warning.
With so many factors at play, markets are unpredictable by nature. That’s why it’s important to remember one of the fundamental principles of investing – markets move in cycles.
What’s more, history shows that that over the long term, the general trend of share markets has been upward. So while your super balance may grow at a slower rate or even decline slightly during a downturn, keep in mind that market movements are a natural part of the economic cycle.
When share markets fall in value, it may be tempting to sell up. However, trying to time the market by selling now and buying back later is a risky strategy that rarely sees investors coming out ahead. By taking a long-term view of your investments, you can ride out any short-term market fluctuations and take advantage of growth opportunities as they arise.
Keep in mind that super is a long-term investment. Shares, which usually form a large part of most balanced super accounts, are also generally a long-term investment designed to provide capital growth over a period of five years or more. So it’s always important to think in years, not days, when considering your potential returns.
Growth assets such as shares tend to fluctuate in the short term but have historically provided excellent returns for investors with a longer investment horizon. And because your timeframe for investing in super could be several decades, short-term market movements shouldn’t diminish the long-term potential of your investments.
Before you withdraw from an investment, you should understand all the implications, risks and costs involved.
Diversification is one of the most effective ways of managing market fluctuations, as it can deliver smoother, more consistent results over time. Your portfolio may therefore benefit by being spread across a variety of asset classes including Australian and international shares, direct and listed property, fixed income and cash.
Having a diversified portfolio can help soften the effects of any sharemarket falls. This is because some asset classes may do well during periods when other asset classes are struggling. Also, spreading your assets around means you’re less reliant on any one asset class at any particular time.
All investments carry a degree of risk. How much risk you’re willing to accept will be influenced by your financial situation, family considerations, investment timeframe and even your personality.
If recent market movements have caused you to reassess the way you feel about risk, it’s worth talking to a financial adviser to discuss any necessary changes to your investment strategy.