Cash is often not king

During share market falls in the early parts of 2020, some members considered, or did move their super into a cash investment option. This has proved to be one of those times when they would they have locked in their losses by missing out on some or all of the gains from the rebound in markets over the last year.

If last year highlighted anything, it’s the importance of patience, and understanding that saving for retirement is a long-term exercise, particularly if you have a medium to long term time frame and are prepared to see some ups and downs in your balances over time. While past performance is not a guarantee of future performance, you have control over the way your balance is invested.

Cash is one of the options available to you. It is designed to provide stable returns over the short-term, and while its risk category is lower than other investment options, it is not exempt from being impacted by changeable market conditions. In the current economic climate the Cash option can produce small negative returns. With cuts to the Official Cash Rate (OCR) over the last 12 months, this has impacted cash rates as these are directly linked to the rate that banks and other financial institutions offers investors. Although the year to date return is -0.04% for cash, the 10 year average per annum is 1.5%.

Before you make any changes to your investment strategy, we recommend you seek financial advice (www.dairysuper.co.nz/financial-advice.html), and read the Product Disclosure Statement to understand the investment options and the associated risk and returns.