Idea of Superannuation Investment option and how not to panic during the crisis: A viewpoint from Dr Tonmoy Choudhury, Lecturer, School of Business and Law of Edith Cowan University. Dr Choudhury explains for the local community how it works.
Australia is a country where superannuation contribution is mandatory by the law. Thus, every taxpayer has a significant investment in their super portfolio with different provider. In regular world, a contributor will choose a portfolio risk potion in investment mix and just sit down and wait. But the current global pandemic has impacted significantly on the portfolio return. This has significantly impacted investors specially the migrant workers confidence and they have started to panic and changing their investment mix. Question is whether this is good or bad?
To answer this question today we have Dr Tonmoy Choudhury from Edith Cowan University, Perth where he works as a lecturer in Finance and Accounting. He works in risk management in financial markets and institutions and currently working on a project to define 'safe assets' during Covid 19. A working paper has been accepted in US based THE RISK, BANKING AND FINANCE SOCIETY’s annual conference. He will explain us what are the super-account holders are doing, why are they doing and is it a good idea?
Dr. Tanmoy Chowdhury, Welcome to SBS Bangla
We know that investing in a Super Fund is very important for Australians, but it turns out that Super Account holders are losing their money during the pandemic and are panicking and investing in other sectors, obviously a sense of restlessness is felt among them. What should be the investment policy in this case?
First of all, there is nothing to panic about, we all know that the pandemic is going on now and some investors will lose money at this time. But you must remember that investing in a super account is not just a one-year investment, it is a long-term one, you have to think for 30 years, whatever you lose now, you will get back in the future. From what we see at the moment, the Australian market is more stable and stronger than other markets in the world. I hope that when the pandemic is over in the next six months or a year, you will get back double or triple what you lost now. So my advice is not to panic at this moment, just wait and see.
There are a significant number of international students in Australia, including Bangladeshis, what should they do?
Many international students, including Bangladeshis, try to immigrate after finishing their studies and stay here at the end of the day. Many have been given the opportunity to withdraw money from the super accounts of those who are working, my advice to Bangladeshi students is not to do that. The one thousand dollars you have today will become two or three hundred thousand dollars in 30 years. My advice is to keep the money in your super account the way it is, over time you will see that the amount of your investment has increased. Now the ups and downs of the market are normal in such a situation, but it will get better with time.
What do you think would be the best investment policy for a super account holder once the pandemic is over in general?
Once the pandemic is over, we will enter the 'New Normal', the world rediscovered it after the economic downturn in 2008-9. At the moment, the world's major powers are saying that they will diversify their supply chain management after the pandemic, so those who invest in super accounts have three options: low risk, middle risk and high risk. So most investors choose to have middle or low risk, but we see people constantly trying to change their investments almost every day after hearing the news of the stock market rise and fall, which is a very bad thing. But I believe that once the pandemic is over, the market will return to normal. All they have to do is go back to the policy they were following before, that would be better.
You are currently working on a project on ‘Safe Assets’ at the time of COVID 19, would you briefly explain the matter?
In this project some researchers from Germany and I are working, what we want to see is this COVID 19 pandemic, it is definitely a mega crisis, there was an economic recession before. We found there is less chance of losing money if you invest in ‘safe assets’ during any of these two crises. Analyzing various studies, we have seen that bonds of US and European governments, coal and fuel oil, have remained as safe assets for investment even in the midst of so many crises. What was safe before is still there. Many seem to be investing in the health sector or the pharmaceutical sector because of the demand during this pandemic, but keep in mind that these are all temporary. When the pandemic is over, the investment picture will return to normal.
Dr. Tanmoy Chowdhury, thank you very much for giving time to SBS Bangla.
Thank you too
To listen to the whole conversation please click on the audio player above.