Amid all this world uncertainty and market volatility, should you be moving your funds into cash and get out of these markets?

If, for whatever reason, you moved your funds into cash in January, well done. However for those who remained invested in the markets, you would have likely seen a significant drop in your super balance over the last month.

You may be asking yourself – should I get out now or play the long game?

According to a report in the Sydney Morning Herald, many older members have been moving their funds to cash over the last few weeks with the average age of switchers being 49 years of age.

For most people, this switch would be a mistake. By making this switch, you are locking in the losses you have incurred in the last month. While the market may keep falling in the short term and justify your decision, history has shown us that markets do recover and by being invested in cash, you will miss out on this recovery.

Further, with cash rates at all-time lows, the returns received on cash are not enough to keep up with rising prices and as such, you are increasing your exposure to longevity risk – the risk that you will outlive your money.

Now this is not to say that there isn’t a place for switching to a lower risk investment option for those approaching retirement. However, these switches should be discussed with a trusted financial adviser with a long term view, and rather than a panicked reaction to the financial markets.

If you have moved your money to cash with the intention of ‘buying the bottom’, while your intentions may be good, executing this ‘plan’ is much harder said than done.

No one knows where the bottom is. If you buy too early and the market continues to fall, do you panic sell again and lock in more losses? Alternatively, if you buy too late, you may have missed the upside from buying the bottom and don’t recover the losses you initially locked in when you moved to cash.

Investing, whether in super or not is a long term thing. Trying to play the market in times like this is extremely difficult and adds unnecessary risk.

Instead of moving to cash, locking in losses and trying to buy the bottom, perhaps use this recent downturn as an opportunity to add more to your investment and buy shares while they are cheaper and continue to invest for the long term.

If you would like to discuss your own personal investments, please feel free to call our Financial Planning team on (03) 5833 3000.