Australian financial commentator Scott Pape has warned people against moving their superannuation into cash out of fear of a market crash, after AustralianSuper members transferred $1.27 billion into cash in a single month.
The September figure was 51 per cent higher than the previous month, according to Pape, who blamed social media algorithms for repeatedly promoting predictions of financial collapse.
Pape, known as the Barefoot Investor, said some readers had contacted him convinced that markets could plunge by 80 per cent, while others believed the world was returning to the gold standard.
“They get fed more of those stories every day because the algorithm knows that fear works,” he said.
“Some people end up selling out of their super and eating baked beans in a bunker, waiting for the reckoning.”
Pape said anyone who moved their money into cash while anticipating a crash would then have to make two difficult decisions: when to sell and when to invest again.
“The problem is they actually need to be right not once, but twice: get out before the market crashes, and get back in before it rebounds,” he said.
He added that people who moved to cash could find themselves waiting for social media to signal when it was safe to return to the market.
“Well, they’re on the sidelines, waiting for the algorithm to tell them when it’s safe to go back in (hint: it never does),” Pape said.
He also warned that online financial content could turn everyday conversations into discussions about economic collapse, citing the way algorithms can push users towards increasingly alarming material.
In the same column, Pape addressed a 15-year-old reader who said he had $3,500 in shares but found online investment advice overwhelming. The teenager said long-term investing appeared boring compared with claims that people were becoming rich overnight through crypto.
Pape urged him to be wary of influencers who promote expensive courses or cryptocurrency schemes, saying some were “making money from” the products they recommended.
Instead, he encouraged the teenager to read, exercise and develop good habits, including reading Atomic Habits by James Clear.
“Nothing life-changing happens while you’re staring at a screen,” Pape said. “Ultimately, you need to focus on doing things. Not just reading or watching videos about doing things but doing them.”
Earlier this year, Pape also urged Australians to examine their super funds to ensure they were not paying excessive fees or missing out on higher returns.
