Some Perspective on your Super Fund

What’s happened to your super fund in the last few weeks?

Many people are watching the daily unfolding of the twin pandemics of Covid-19 and the resulting economic turmoil with morbid fascination.

Nightly we are bombarded with how much the share market has fallen and it’s easy to then assume that your super fund has fallen by the same levels.

This isn’t the case. Whilst most super funds do have exposure to shares and property, and it is true that most super fund values have fallen recently – they haven’t fallen by the same levels as we have seen in Australian and International shares as reported on the news each night.

It’s a good idea to get some perspective on what has really happened to your super fund.

The Australian Share market as measured by the ASX 200 fell 32.5% from peak to trough from February 16th to March 15th. This is a massive drop in a very short period of time.

By the end of March 2020, it had fallen by 18% for the 12 months from March 2019 to about the same level as it was in March 2016.

In the same period, the average Balanced Super fund had fallen by 4.4%.

Yes, they have fallen, but nowhere near as much as the share market has fallen. And the reason is that Balanced funds not only invest in shares, they also invest in Property, Fixed Interest Bonds, and Cash. Diversifying across asset classes helps cushion large movements in one asset class.

The calendar year 2019 was a spectacular year for most super funds, with the average Balanced Fund returning 13.3%, over twice as much as is normally projected.

These spectacular returns also served to cushion the effect of the recent drastic falls – the falls were from higher than expected levels.

So, whilst the share market has retracted by 4 years to 2016 levels, most Balanced super funds had retracted by a little over 1 year to the beginning of 2019 levels.

These numbers will vary for super funds with greater or lower exposure to shares and property, and that’s why its important to contact your adviser to get some perspective of what has really happened to your retirement savings.

It is unknowable how deep the falls will be, or how long before we return to previous highs. It is right to be concerned, but don’t be panicked into making the wrong decisions.

Speak to your adviser about your personal strategy.