The best defence for SMSF trustees in the wake of any market volatility caused by the US presidential election is having a clearly defined, well-rounded and long-term investment strategy, says SMSF Association CEO/Managing Director Andrea Slattery.
“In the short-term, the US election result, particularly if the Republican candidate, Donald Trump, is elected, is likely to increase market uncertainty and that may have a negative impact on the value of trustees’ SMSF portfolios.
“But over the longer-term, it will be much more difficult to predict how either a Trump or Hillary Clinton presidency will affect economies and shape financial markets around the globe, which is why it is critical trustees adhere to their long-term investment strategies and don’t have a kneejerk reaction to the election.”
Slattery says SMSFs are legally required to have an investment strategy, and times of extreme market volatility underpin why the legislative framework makes this mandatory.
“Your investment strategy is your best friend to guide your fund through uncertain times – such as the ones we could face post the US election.”
She says a key aspect of an investment strategy is to consider the diversification of an SMSF’s assets.
“Diversification of your retirement savings across different assets and regions is a key in protecting your fund from volatile financial markets over the long-term.
“Although it is important to keep track of events that affect financial markets and your retirement savings, it is important to remember that superannuation is for the long-term and that sometimes short-term decisions can do more harm than good. A good investment strategy that keeps trustees disciplined and focused on the long-term is essential.
“An excellent example of this was the market volatility post-Brexit, with the decision by UK voters to leave the European Union in June having an immediate and momentous impact on financial markets across the globe.
“The UK leaving the EU was rightly portrayed as being one of the most significant political events in recent years, having implications for the UK and European economics as well as the broader global economy.
“But post Brexit the markets have settled down. Indeed, some economists and market commentators are seeing some positives in the UK’s decision to leave the EU. In the same vein SMSF trustees should not make any hasty decisions post the US presidential election.
“However, trustees should take the opportunity afforded by any market volatility in the wake of the US election to discuss their investment strategy with an independently accredited SMSF professional to ensure it meets their long-term retirement savings goals.”
