Today, we continue our series on the reasons why people choose to buy property through their superannuation. Following yesterday’s article, Self-Managed Super Funds and Investing in Property, we’re exploring reason number two: avoiding the volatility associated with other asset classes.

Volatility refers to the frequent and often dramatic fluctuations in the value of investments. While some investors thrive on the excitement and potential high returns of a volatile market, it can be nerve-wracking for others, especially when dealing with hard-earned savings. In essence, volatility is the antithesis of peace of mind. Investors generally seek a steady increase in their investments, with the assurance that their nest egg is safe and growing. Volatility can erode that sense of security.

Comparing Asset Classes

To better understand volatility, let’s compare different asset classes:

Shares

The stock market is a prime example of volatility. Consider the U.S. stock market from 1900 to 1993—a nearly 100-year span. In this period, the market experienced 50 declines of 10% or more, which is termed a “correction.” This means, on average, the stock market dropped by 10% every two years. More strikingly, 15 of those corrections were severe, with drops of 25% or more. That’s a significant decrease every six years on average. Are you comfortable with the possibility of seeing a quarter of your investment vanish in a single downturn?

Cryptocurrencies

Cryptocurrencies, particularly Bitcoin, are renowned for their extreme volatility. Here are some notable declines:

  • August 2012: Bitcoin dropped by 56%.
  • April 2013: An 83% drop.
  • December 2013: A 50% decline.
  • December 2017 to 2018: An 84% fall.
  • March 2020: A 50% decline at the start of the COVID-19 pandemic.
  • May 2021: A 53% drop.

Imagine having your life savings invested in an asset that plummets by over 50% in a month. The stress and anxiety of watching your hard-earned money evaporate can be overwhelming and, for many, intolerable.

The Stability of Property

Unlike shares and cryptocurrencies, property is far less volatile. Its value doesn’t fluctuate wildly on a day-to-day basis. Instead, property tends to appreciate steadily over time, providing a reliable and predictable investment path. This stability is a significant reason why many choose to invest in property through their superannuation. It offers a peace of mind that volatile markets can’t match.

Why Property Through Super?

Investing in property through a self-managed super fund allows you to take control of your retirement savings while minimising exposure to the unpredictable swings of other asset classes. With property, you’re investing in a tangible asset that’s less prone to sudden value shifts, ensuring a smoother journey toward your financial goals.

As we continue our series here at Teach Me About Property, we’ll delve into the next reasons why people opt for property investments within their superannuation. Stay tuned for tomorrow’s deep dive: access to a deposit.

Information from Teach Me About Property is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).