A year of very strong returns on balance

After a financial year that ended with very volatile investment markets, early indications from Super Ratings suggest it has been a very strong year of returns with the average “balanced” super fund (between 60% and 76% allocated to growth assets) returning around 15% after fees and taxes.

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This is now the fourth consecutive year for positive returns. The last time funds performed this well was in the year to June 2007, before the Global Financial Crisis.  The results were helped by a strong performance by both internal and domestic share markets, as well as a weakening of the Australian dollar towards the end of the financial year.

Some of the stronger performers over the last financial year are shown in the table below, and general resulted from a bias to overseas shares, with unhedged positions helping to boost returns as out dollar fell.

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However, it is important to avoid the temptation of focussing too much on one-year numbers, as super is a long-term investment structure for saving for future retirement needs.

After a well-above average year it is likely that next year’s returns will be lower.  It is also worth remembering the 10-30-60 ratio, which holds that for every dollar we spend in retirement, 10c comes from contributions to super, 30c from earnings on our super while working and 60c from earnings generated from our super when retired.

For this reason it is also important to winding back too far out of growth assets in retirement, or the decumulation phase, since most of our retirement lifestyle and how long our funds will last depends on decent growth in addition to income when no longer working.

Our Partner – Wealth Consulting, Michael Rees-Evans CFP®, can be reached on our office number at top right of this page.   As an SMSF Specialist Advisor he is well placed to help.   See the "where do I start page" for more infomation or Michael can also be reached by email at michael.rees-evans@lockwood.com.au.

Important note: this information is of a general nature and has been prepared without taking account of anyone’s financial situation, objectives or needs. Before making any investment decisions based on the contents you should obtain professional advice.

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