Funds perform spectacular bounce back
Who’d have guessed. There we were this time last year beating our brows and gnashing our teeth over the state of our super. (Or were we beating our teeth and gnashing our brows?) Anyway, we weren’t happy little campers. Then lo and behold, things bounced back. Not just a little bounce, either. This rebound has been spectacular.
That’s the way it has pretty much stayed for the past 12 months. Now March 2010 has thrown up another healthy month of growth and if things keep going the way they’re going right now, we could be in for the fifth year of double-digit growth in the past seven. That kind of result is unprecedented.
We’ll get to the figures for the month of March in a minute. But first let’s look at fund performance over the past decade - in this case median results for the funds that comprise the SR50 Balanced (60-76) Index.
<image /image/marchgraph>
Following the accepted historical principle that an economic slump occurs every six or seven years, the slump of 2008 and 2009 was expected. What wasn’t expected was the size of that slump. The severity of the recession was all the more evident because of the four years of extraordinary growth that preceded it.
There’s a good bet most of us had slipped into complacency by 2008, even taking double-digit growth for granted. We are humans, after all. We share the human foible of remembering good things and erasing bad things from our memories. 2002’s loss and 2003’s stagnation had become vague ghosts in the background.
When we saw what the GFC did to our super balances, didn’t we squeal? We pointed fingers. We loudly accused our funds of dropping the ball. We stomped around in frustration. We called for heads to roll. We used bad language.
Well, maybe our funds have redeemed themselves in the past year. If the growth they’ve shown so far this financial year continues for another three months, we could have more than recovered 2009’s losses in a single year. Plus a chunk of 2008’s losses to boot.
Watch this space to see if the trend continues.
OK, so what of March’s results?
In a nutshell, SR50 Balanced Index March medians are up close to 3%. They’re up close to 14% since July last year. They’re up over 18% in twelve months. With five double-digit years likely in the past 7, the funds in our survey will average well over 7% p.a. over those seven years. With super’s tax advantage taken into consideration, that’s a pretty handy result.
| The month of March 2010: | 2.9% |
|---|---|
| 3 months ending 31 March 2010: | 1.62% |
| Financial year to 31 March 2010: | 13.95% |
| 12 months to 31 March 2010: | 18.40% |
| Rolling 3 year return to 31 March 2010: | -1.47% pa |
| Rolling 5 year return to 31 March 2010: | 4.87% pa |
| Rolling 7 year return to 31 March 2010: | 7.42% pa |
| Rolling 10 year return to 31 March 2010: | 5.46% pa |
We know we sound like a broken record (or for those born post-LP, like an iPod on repeat), but it’s absolutely, blindingly, undeniably obvious that you need to choose your fund carefully if you’re going to benefit from these double-digit growth years.
This chart says it all:
Best and Worst fund option performance over last 12 months
| Option Type | Highest | Top Quartile | Median | Bottom Quartile | Lowest |
|---|---|---|---|---|---|
| Balanced (60%-70% Growth) | 29.6% | 21.9% | 18.4% | 16.3% | -1.3% |
| Growth (77%-90% Growth) | 32.2% | 28.8% | 24.0% | 20.7% | 16.2% |
| Australian Shares | 47.9% | 41.0% | 38.9% | 36.4% | 27.0% |
| International Shares | 38.7% | 27.0% | 19.1% | 14.0% | 7.6% |
| Capital Stable | 18.4% | 13.9% | 12.3% | 9.9% | -0.4% |
| Property | 52.0% | 39.9% | 19.5% | -0.3% | -14.2% |
| Cash | 5.9% | 3.5% | 3.0% | 2.8% | 1.1% |
So, if you want to see your super balance bounce back (some nice bouncy alliteration for you) spectacularly, do a bit of research and get into a fund that’s going to lead the way, not drag up the rear.
Disclaimer: SuperRatings Pty Limited holds Australian Financial Services Licence No. 311880. Any advice provided here is of a general nature and does not take into account your individual financial situation, objectives or needs. It is not guaranteed to be accurate or complete. Information has been prepared without taking into account your individual financial objectives, situation or needs. You should, before acting on the information, consider its appropriateness having regard to your own financial objectives, situation and needs and consider obtaining personal financial advice from a financial adviser. Before you make a decision regarding any of the products mentioned, you should obtain and consider a copy of the relevant Product Disclosure Statement from the product issuer.