You should be feeling better about your Super returns
The latest Super fund returns have just been released; how do they compare against your fund?
Super funds surpassed expectations in the financial year to June 2023. Against a backdrop of challenging economic conditions and high market volatility, the median Growth fund returned 9.2%, more than making up for the 3.3% fall the previous financial year.
The main drivers of the remarkable result were Australian and international shares, which returned 14.4% and 18.3% respectively over the year to June.
31 years of Super performance
In the year to June 2023, the median Growth returned 9.2%, the 12th positive return in 14 years and well ahead of the typical long-term objective of around 6% per year. Growth funds typically aim to post no more than one negative return every five years, which translates to six negative years over the past 31. As it happens, they have had only five, that is why your investment selection based on your investment profile is so important.
The opportunity cost of selecting a conservative portfolio over the longer term can cost your dearly.
Close to 70% of Australians with super in one of the major funds are invested in their fund’s MySuper option, the default option for employees who don’t wish to choose another super fund. Around 40% of the 69 MySuper products registered with the Australian Prudential Regulation Authority (APRA) in August 2022 were lifecycle products. This means that your investment selection becomes more conservative as you get older.
If you can whether the storm, then the outcome can be worth it
Take a look at the chart above and compare the compound return for a growth investor against a conservative investor over a 10 year period. If you were to put those figures into your compound interest calculator, you would be astounded.
Risk profiling is a process Advisers use to help determine the optimal levels of investment risk for clients. It aims to identify the risk required to meet your investment objectives, your risk capacity, and your tolerance to risk. We are currently sending out to our clients the annual risk assessment questionnaire to make sure that you are invested in the correct profile which will have a big financial impact to your long term plans.
The ability to take risks is evaluated through a review of an individual’s assets and liabilities. An individual with many assets and few liabilities has a high ability to take on risk. Conversely, an individual with few assets and high liabilities has a low ability to take on risk. For example, an individual with a well-funded superannuation account, sufficient emergency savings and insurance coverage, and additional savings and investments (with no mortgage or personal loans) likely has a high ability to take on risk.
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