World share markets in particular have performed strongly in the past five years, boosting superannuation returns.
World share markets in particular have performed strongly in the past five years, boosting superannuation returns. Shan he

Australian super funds make hay over 5 years

OVER the next few weeks superannuation fund members across Australia will be receiving statements from their funds, and the news is going to be good.

The median or typical balanced fund (in other words a fund with somewhere around 70% invested in growth assets such as shares) produced a return of 10.8% for the past financial year.

Over the past five years, median fund returns have been 10.4% per annum.

World financial markets have endured plenty of volatility over that time; there have certainly been plenty of things to worry about. Despite that, the markets have been generally kind to investors.

World share markets in particular have performed strongly.

While much of this performance has been due to the major developed share markets of the world, such as the US and Europe, over the past year it's been shares in the emerging economies of Asia, Latin America, and Eastern Europe that have been the star performers.

Over recent years, Australian shares have tended, more often than not, to under-perform in overseas markets, but have still produced reasonable returns. It's often said that diversification is the only free lunch in investing, and diversifying an investment portfolio by investing outside of Australia makes a great deal of sense.

While strong super returns are great news, it's important to realise that those returns are now in the rear view mirror and the windscreen is way more important.

"Past performance is no guide to future performance” isn't a sentence that's added to prospectuses or product disclosure statements for no reason.

The reality is that the strong returns of recent years make it more difficult from here, because bargains are that much harder to find.

Superannuation is a highly tax effective long-term retirement savings vehicle, and will remain so, but over the long-term (seven, 10, 20 years and beyond) double-digit returns are not the norm.

No super fund member should assume that the past five years is typical when planning their retirement!

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