Has the GameStop, AMC trading frenzy impacted your super?
If your superannuation is invested in a well-diversified fund, you shouldn't be too concerned about the Reddit-fuelled GME and AMC trading events.
The past week's trading frenzy of GameStop has likely left a few people anxious about the impact on their super. GameStock stocks started January at just US$17 and rose as high as US$350 in the month in a coordinated short squeeze attack on Wall street led by retail traders on Redditt. Other highly-shorted stocks soon followed including AMC, BlackBerry and Nokia.
While the dust appears to be settling a bit now, what impact has this had on your super and how could it affect your balance if it keeps happening? Finder spoke with a few industry experts to find out.
What impact (if any) has GameStop had on your super?
According to director of SMSF and investor behaviour at NAB Gemma Dale, this trading frenzy has had little impact on Australian super funds.
"It seems unlikely there will be any significant impact on Australian super funds. A typical balanced fund will have 20-30% of its assets in international equities, which would usually include over 1,000 different shares. The impact of a short squeeze on one or two shares, particularly if it is short-lived, is likely to be infinitesimally small at a portfolio level – you'd never see the impact in your fund or on your statement," Dale told Finder.
"Even investors with aggressive or high growth portfolios are likely to have had no, or negligible, exposure to affected shares," she said.
Associate professor from the University of Sydney Business School Shumi Akhtar agrees the trading of GameStop will have little to no impact on our super.
"The GameStop trading frenzy is unlikely to be a long-lasting trend with permanent consequences. GameStop or silver's price surge have been short-lived and it is highly unlikely such situations with other assets will continue because there is no fundamental change in the underlying asset. A single stock or a single commodity like silver will not have much effect on superannuation," says Akhtar.
Diversification is the key
"Your super portfolio is very well diversified across a range of asset classes, including cash, fixed income, property and shares. Unless you've specifically chosen a concentrated fund, your super fund holds investments in literally thousands of high-quality businesses, and volatility in a small handful of companies in the US is extremely unlikely to have any long (or even short) term impact on your retirement savings," said Dale.
Head of portfolio strategy at Sunsuper Andrew Fisher told Finder even members with a high exposure to international shares in their super would have seen little impact.
"To put the impact in context, a superannuation member with $50,000 invested in Sunsuper's International Shares option, would have $32,000 invested in US Equities. GameStop's share price increased from $18 to $350 per share during January, which is a gain of 1,800%, however that member would have seen their balance increase by approximately $17 to $50,017, which is a gain of just 0.03%," Fisher said.
What should you do with your super at the moment?
If you're wondering what you should do with your super during periods of increased volatility the message is simple; leave it alone.
"Timing the market is extremely difficult, even for professionals, and for a long term investment like superannuation, staying invested is often the safest and most profitable option. While COVID-19 had a dramatic impact on markets and lives around the world, many portfolios are back to their highs, meaning investors who sold fearing the worst have lost a lot of value," said Dale.
Akhtar agrees that most Australians should leave their super alone, and reminds us that superannuation is a long-term game so it's important not to get distracted by short-term noise.
"Every asset class is currently volatile. Turning investment capital into cash will not give much return as the cash rate is at one of the lowest of all time. Unfortunately, there is no safe haven or silver bullet in this unprecedented time so remaining calm and putting this recent news in the context of the pandemic is important," Akhtar told Finder.
"Super is a long-term investment. People should not panic because mispricing or misevaluation of stocks and silver by amateur investors will likely be short-lived. The price correction will take place quickly as markets do not operate on speculative investor's opinion or their buy-sell pressure," she said.
You can save thousands of dollars by switching to a diversified super fund with lower fees and a longer history of strong returns. If you haven't looked at your super in a while, compare super funds now or consolidate your super if you've got multiple funds.
