There is much speculation at the moment about double dip recessions, huge head and shoulder patterns appearing across the DJO and other leading indicators point to a bear market; however we all know that free market manipulation by government through various monetary policies can create artificial recoveries and affect the short-term movement of the markets.
Over the last few days we have seen some of the major international blue chips showing unusual trading patterns: Apple Inc. (AAPL) down more than 12 points is more than unusual. Baidu, Inc. (BIDU), and Amazon.com Inc. (AMZN), slaughtered. F5 Networks, Inc. (FFIV), SanDisk Corp. (SNDK), and Cree Inc. (CREE) slammed as well. However we also know insiders are discussing the Fed looking to increase the US budget deficit through yet another stimulus package.
So how do we protect our superannuation from short-term market volatility? A move to cash could prove worthwhile if we had a crystal ball and could predict the exact bottom of the market as a re-entry point – however anyone who claims to profess this kind of knowledge isn’t working in the financial services industry, they are on a beach drinking pina coladas!
The real value comes in assessing your age and time of life to develop the appropriate investment strategy and investment time horizon for you. Regardless of age however, diversification within your superannuation is key, not just within each investment class but across investment classes. A true multimanager approach should offer sufficient diversification to your portfolio, reducing your overall correlation to investment markets through the introduction of alternative assets.
Industry super fund members should assess their fund and the subsequent exposure of their portfolio to unlisted assets. As a generalisation, industry super funds experienced massive write-downs in their unlisted assets – which lead to a huge drop in fund members super balances. In times of extreme market volatility, a situation could present itself for industry fund members with unlisted asset exposure that is reminiscent of situations faced during the GFC.
This is the time to think, plan, and develop a war chest of strategies which can lead you through the best and worst of times with upmost confidence.
