Why does my super balance go up or down?

You super account balance can go up and down – and that’s normal. Here’s why: your super is invested in the market and investment markets, like shares and property, can go up or down. One reason your super balance may fluctuate is because it may follow the performance of the markets in which it is invested.

It’s natural to feel a bit uneasy when you see your super balance has fallen but by nature, investment markets will move through cycles which include ups, downs, and even sideways trends. Typically, no one knows how long a trend will last. Shares can go up or down depending on what’s happening in the world, however, while past performance is not a reliable indicator of future performance, we know that historically, share markets tend to rise over the long term.¹  

Bull and bear markets

The rambunctious, go-getting bull, or the grumpy, hibernating bear: these animals perfectly describe the key trends in an ever-moving marketplace.

• A ‘bull market’ means a positive market trend. The generally accepted definition is when a market index (like the S&P/ASX 200²) rises by at least 20% from recent lows.
  
  
• A ‘bear market’ means a negative market trend. The generally accepted definition is when an index falls by at least 20% from recent highs.

Some investors will even say they are ‘bullish’ (positive) or ‘bearish’ (negative) on a certain investment or on the prospects of certain investment markets e.g. shares or bonds.

Examples of recent bull and bear markets:

• Bull market: In the 2010s, the S&P 500³ stock market index experienced a bull market when it rose from the ashes of the ‘global financial crisis’ or GFC (just when many had given up hope) to record a decade long rally from an index level of 720 to 3,385. It was stopped only by the pandemic in early 2020. The equivalent Australian index, the S&P/ASX 200 experienced a similar but smaller bull market over the same timeframe.

Source: Bloomberg, June 2009. Past performance is not a reliable indicator of future performance.

What causes these market cycles?

Bull markets can be driven by investors who are eager to buy and as a result, they are bidding prices up. Bear markets can be driven by investors who are eager to sell. The causes of these mass changes in sentiment are complex and often up for debate, even after the cycle has passed. These are a few examples of factors that historically have influenced markets to move:

• FOMO (or fear of missing out) -  Investors see markets going up and they don’t want to miss out.
  
  
• Fear of losing money - Investors see markets falling and they want to get out before it drops any further.
  
  
• Economic activity - This may influence market performance. For example, an economic slowdown or recession can reduce company profits, thereby reducing the amount of money people have to invest. People may also feel less confident about investing. In combination, these factors can drive prices down. Conversely, an economic boom can boost markets. Like all unpredictable beasts though, not all bear markets are accompanied by economic recessions and not all bull markets are linked to economic booms.
  
  
• Surprising news events - These can cause frenzied selling or buying. For example, in March 2020 there was a frantic sell-off in response to the COVID-19 pandemic. Other examples of news that could impact markets include a surprise interest rate cut, the introduction of new technology, natural disasters, and geopolitical events such as a war.

How we manage these risks

Different asset types will react differently to the factors that drive the market cycle. For example, it is a commonly held investment belief that riskier assets like shares tend to outperform in bull markets while more conservative investments like bonds tend to perform better in bear markets.

One of the potential benefits of Rest’s diversified options is that investments are spread across a range of different asset classes. For example, if you’re invested in the Rest's MySuper option, Growth, your super will invested in a range of assets which can include:

• cash
• debt (including government and corporate bonds)
• Australian shares
• overseas shares 
• property
• infrastructure
• alternatives (including agriculture)