It is a well-known adage that ‘fear and greed’ are the two emotions that drive investment decisions but unfortunately, they often lead investors in the wrong direction. Over the past few years, it is the ‘greed’ emotion that has come to the fore, with investors tempted by very strong returns from sharemarkets. However this can be high-risk, which applies to all investments including superannuation.

For many of us, outside of the family home, superannuation will be the largest investment we have. Most people remain invested in the default super investment option available through their fund. This is usually a “balanced” option that combines returns with capital preservation. Many Australians select this option when they set up their fund, look at their statement once a year, and that is about all the level of engagement they will have with their super.

However, there is a growing number of people who are becoming more active with their superannuation, particularly in switching investment strategies. While it is good news that people are more interested in their superannuation, it is bad news that they may not be making the best decisions with their long-term retirement savings.

A recent study looked at 42,000 superannuation switch decisions between 1 January 2019 and 31 March 2021, capturing the extreme sharemarket movements at the beginning of the COVID pandemic, when sharemarkets fell very quickly by approximately 30 per cent but had largely recovered most of these losses by the end of 2020.

It found that more than half the superannuation switches resulted in a worse outcome for the member than if they had simply done nothing at all during this period.

This is an illuminating example of fear and greed in action. It is understandable that people want to move into a conservative investment option after investments have already fallen substantially in value. Likewise, people tend be reluctant to move back into share markets until they have already risen 20 per cent. But this type of trading will result in members losing money. If this pattern of selling low and buying high is repeated, it can destroy most of someone’s wealth.

It is not just superannuation that is affected by this. When investing in shares, it is often the case that if people had simply purchased shares and then not touched them for several years, the outcome would be better than more regular buying and selling. Other research indicates the average investor return in share markets is about three per cent a year less than the index. While this might not sound like much of a difference, over a long period of time it will compound into a significantly worse financial outcome.

Technology means it is now much easier than it was in the past to switch super, or buy or sell shares – people can simply change their options using a mobile phone app.

But while technology has greatly improved our ability to access information and trade more in shorter periods, it has increased the risk that we could do something that worsens our financial position.

To a certain degree, Australians are protected by the limited investment options offered by super funds. For example, people are not able to put 100 per cent of their super into bitcoin or gold or whatever the latest investment du jour might be. But we can still get caught in the trap of following last year’s winner. This might work for a year or two, but historic one-year returns show that each asset class can move from the top to the bottom in a very short period of time.

All of the above is a long way of saying that the default investment option for superannuation is probably the best option for most people throughout their working life.

For those who have a financial adviser, this can be a valuable behavioural coach, particularly in times of crises, to remind us that this too shall pass.

Generally speaking, the point at which most people tend to seek advice is when nearing retirement. A common question is whether their superannuation investments should change? The simple answer is “probably not” – the average life expectancy for Australians means that many will spend close to 30 years in retirement, which is a long timeframe.

In order to preserve the wealth they have spent a lifetime building, and be able to ‘live off the income’ in retirement, means having strong, stable investment returns – enough to cover the pension withdrawal and also a couple of per cent for inflation. It’s also a good idea to have a few years’ worth of pension payments in safe secure investments that will hold their value in a market downturn. All this will help with the ‘sleep at night’ factor when retired. So, this New Year, it could be worth making a resolution to leave super investments alone.

Jonathan Philpot is a director of HLB Mann Judd Wealth Management (NSW) Pty Ltd (AFSL 526052) ABN 65 106 772 696. This content contains general advice which does not consider your particular circumstances. You should seek advice from HLB Mann Judd Wealth Management (NSW) who can consider if the strategies and products are right for you. Information
based on historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.
Jonathan Philpot has a regular column in Money Magazine. This article first appeared as part of this series on 17 December 2025.