Will the roller coaster ride ever stop?

The past few weeks have been a bit of a roller coaster ride regarding the Australian share market, with bad news from the US and the prospect of higher inflation in Australia, prompting significant selloffs in key stocks.

However, superannuation savings are largely immune to these inevitable ups and downs of the investment markets and those who hold their non-real estate wealth in super, should take comfort from this key factor.

Firstly, superannuation is by definition a long-term investment. The fact superannuation savings are usually held for decades means there is an ingrained ability to ride out any short-term volatility.

Even if you are close to retirement age, as long as you don’t panic and sell, and that is what you are doing if suddenly tell your super fund you want to move to cash, your super savings should recover in due course.

Secondly, the fact you are constantly adding to your superannuation via your superannuation guarantee contributions, means you are effectively dollar cost averaging your investments, which means you are buying more when prices are low and less when they are high. That's a sure fire winning strategy!

Finally, superannuation is one of the most tax effective way of holding any savings or investments.

Typically, any earnings or capital gains made by investments held within a superannuation account is taxed at just15%% - well below most people’s marginal tax rate.

If you make a contribution to super and claim it as a tax deductions, you will pay a 15% contribution tax on those concessional contributions, but this is usually offset by tax you will save elsewhere on your income.

If you contribute to superannuation and don’t claim it as a tax deduction, you won’t pay any contribution tax.

Most importantly when you retire and establish an account-based pension, or your own private pension, the assets supporting that pension become tax free both in terms of any income they generate and any capital gains tax.

The income you receive is also tax free in your hands.

So again, this softens the impact of any short-term swings in the market place and should stop you from worrying too much about your investments within super.

As long as you get good advice and invest your money in solid investments with a history of paying solid investment returns, super is a safe place to keep your savings regardless of what the markets do.