Why switching your super into cash in a market downturn can make you poorer in the long run

With markets experiencing sharper volatility due to conflict in the Middle East, the Super Members Council is warning Aussies to be wary of switching their super into more conservative investment options like cash, with new analysis finding it can leave people significantly worse off in the long run.

A common question during market downturns is whether you should switch investment options to try to limit losses. But the evidence suggests this typically makes you worse off: individual investors often have a poor track record of market timing - and switching to cash risks missing the sharp recoveries that often follow declines.

The Council’s analysis shows that in the worst-case scenario, for someone with $100,000 in super, switching to cash at the COVID-19 trough could have left them around $50,000 worse off over five years; while during the 2025 tariff episode, someone switching to cash could be around $7,000 worse off over just one year.

Superannuation fund declines during the Global Financial Crisis (GFC) and COVID-19 were less than a third of those of major equity markets, while funds recovered to pre-GFC highs more than a year earlier than the Australian stock market. Australia’s super system is built to withstand short-term shocks and deliver strong returns for members over decades, not days or weeks, under the stewardship of teams of highly skilled investment experts.

Super has historically performed strongly over the long term – with profit-to-member funds returning over 7.5% a year on average over the last decade to December – despite the ups and downs in the equity markets. Super is typically a highly diversified investment.

Most Australians’ super is invested in balanced options, with investments diversified across a diversity of assets and geography - moderating the impact on members’ super returns from movements in any one stock market.

For the millions of Australians with retirement savings in super, particularly in profit-to-member super, the system is designed to navigate short-term shocks to the Australian and other economies through long-term investments in infrastructure, property, private equity, cash and bonds other assets typically not listed on global share markets.

“When markets fall, the temptation to switch your super to conservative investment options like cash can mount, but analysis shows it could mean you potentially lock in those losses and miss the recovery,” says Super Members Council CEO Misha Schubert.

“Market movement can be challenging, but switching during a downturn can be like turning down a side street to avoid traffic right before the main road you're on clears — analysis shows it usually leaves you worse off in the long run.”

This is factual information only and should not be taken as constituting professional or financial advice.