The coronavirus pandemic has hit ASX shares hard and sent superannuation balances plummeting. Many Aussies are invested in ASX shares through their super and no doubt many are watching their retirement funds fall lower.
But with the global economy facing a period of uncertainty right now, is it time to change your super allocation?
Is now the time to change your super allocation?
It's perfectly natural to be worried about your investments right now. For many Australians, their super will be their largest investment account with a guaranteed 9.5% p.a. paid by employers. Your super is likely diversified across ASX shares which makes the S&P/ASX 200 Index (ASX: XJO) a comparable benchmark.
Given the ASX 200 has fallen more than 20% this year, that's a substantial hit to your wealth. But critically, now is not the time to change your super allocation. If you were to change allocations, your super fund would change your investment "units" from one asset to another. That would effectively turn your paper losses into actual losses.
By changing your super now, you would lock in the losses from ASX shares falling lower. That means when coronavirus passes and the share market rebounds, your investments would be in other asset classes.
You may be thinking you could then simply change back to a high growth allocation afterwards. However, timing the market rarely leads to optimal outcomes. If you changed your super before the heavy losses in February, then changing to high growth now could be a good idea. But panicking now is not going to be helpful for building long-term wealth.
Are there exceptions?
The one big caveat here is how close to retirement you are. Whatever the circumstances, crystallising your losses and changing your super should be a last resort.
However, if you really need the cash then a safer allocation could be the way to go. No one knows if and when the market will fall further, nor when it will bounce back.
The only way to guarantee that you won't lose money is not to sell your ASX shares in a down market.
