The Coronavirus crisis is having a devastating impact globally. On the severe end, people are dying and economies are crumbling, there is no denying that this is an incredibly concerning time for everyone. Even those of us lucky enough not to be involved in the worst case scenarios are all being impacted by global, national and local shutdowns. You may be suffering from the growing number of job losses, heavy restrictions on how you live your life and your finances have most likely already taken a large hit.

The stock market has taken a 30% dive which is having an extended impact on all of us, whether you’re directly or indirectly involved. The reality is the majority of us have our Superannuation in a Retail or Industry Super Fund. If you’re reading this right now that is likely you and you are seeing your retirement fund dwindling by the day. At the start of the month data from analysts Morningstar reported an average loss of 6% which by the 18th of March was 12% according to SuperRatings. The numbers we are hearing now are much closer to losses of 20% and this article will be updated as fresh numbers come to light. What that means is for a Super balance of $200,000 you have lost $40,000 in a matter of weeks and realistically we don’t know when that number is going to stop growing. 

In 2008 we faced a very similar situation where the Stock Market took a massive hit. By the end of it shares took a 54% dive, it took until this year to fully recover…..12 YEARS. We are a lot closer to that number already then any of us would like to be. If you have your money in an industry or retail Superannuation fund then you are mostly invested in the stock market and have very little say over your money.

When we saw a similar crisis in 2008 record numbers of Australians started to move their money into SMSFs. This allowed them to have far more control over where their money was spent and to look at less volatile alternatives. Enter property an asset class that can only be utilised through an SMSF. Property in an SMSF is an attractive option, especially given the current economic climate, it becomes a popular solution for 3 reasons.

Minimise Losses

First and foremost by moving over to a well thought out SMSF investment strategy, you can minimise your losses. You are no longer at the mercy of your fund and can have a greater say over where and how your money is invested. Moving over to an asset class like property historically presents faster growth, recovery and in the majority of Australia much less of a loss in general.

Extensive Leverage Capabilities

Whether in crisis or not property as an investment offers far better leverage opportunities. For example $200k in the stock market buys you $200k worth of shares, in the current climate, it becomes $160k worth of shares almost overnight. On the flipside, $200k invested into a property buys you $500k worth of property. In a lot of areas in Australia that price could stay firm it may drop or may rise but whatever happens you are playing with 2 and a half times the what you would be in the Stock Market. So say things calm down and even if they both make around 5% per annum over a decade, 5% compounding interest on $200k will make $125,779 and on $500k will make $314,447. 

Less Volatile Asset

As we stated above Property is a less volatile asset than shares especially here in Australia as the fundamentals that underly the property market are strong and unfortunately as many Australians learnt during the GFC moving over to an SMSF is the only way to properly take advantage.

So even should the property market see a decline you are still far better off over the long-term and need to remember Super is all about retirement. You are creating a long term plan here, getting too focused on what the market does in a single year is not the way to be successful.

There are other reasons why you may be happier with an SMSF, like lower fees, but in a climate like we are seeing right now, these are the main 3.