Investment Performance

August 2010

The investment rollercoaster rolls on... but long-term, super still stacks up as a great way to save for your retirement.

What can we learn from investment markets in the first half of 2010?

The first half of 2010 was a great example of why it pays to take this long-term view. While the Australian share market* returned -9.9% over the first half, it was a rollercoaster of a time. Things looked great early on. People were positive the financial crisis was behind us, the economy was in good shape and the share market was up. For the first three months of the year, the Australian share market* returned 1.4%. Good times!

But the mood quickly changed in early April with news that a number of European countries were having difficulty paying back their debts. Suddenly there was talk again of problems and the share market lost all its gains and much more. The Australian share market* returned -11.1% between 1 April and 30 June 2010.

So what does this tell us? The first thing is that looking at short-term market performance will send your head in a spin! It also shows that trying to predict what markets will do over the short term is nearly impossible - even the experts get it wrong.

But most importantly, it shows up that we need to have a long term focus on and it's the long term performance of your super that really counts.

So, how does the long term performance of your super stack up?

Despite all that happened, your investment options continue to deliver solid long-term returns.

The returns below are for periods ending 30 June 2010:

• Over five years our super Balanced option returned an effective 4.9% each year... which is after fees and tax and after the impact of the global financial crisis! If you're invested in our pension, the return was 5.5%. Pension investment returns are not taxed.
• All of our diversified investment options (which most of you invest in through the default Lifecycle Strategy) returned solid long-term five-year returns and these investment returns all compared favourably with other super funds^.
• One of the best performers was the Australian shares investment option. Over five years, the super Australian Shares investment option returned an effective 6.1% each year after fees and tax and ranked number seven out of 41 in a survey of like super funds^. The Australian shares pension return over five years was 7.0% and the ranking three out of 34.

Check out the investment returns of all our investment options.

Long-term performance - why it matters

Here's a reminder of some of things we've been talking about with you over recent times. Keep them in mind when you hear about the short-term ups and downs of investment markets.

1. While share market returns bounce around sharply over the short-term, these bounces even out over the long term.

Look at this chart. It tracks the monthly performance of the average balanced fund over the past 10 years. Despite all the ups and downs, and there's been a few, if you'd invested $100,000 at 1 July 2000 it would be worth $168,362 at the end of 2009. This is an effective yearly return of 5.5% after fees and tax.

2. Make sure you have a long-term plan and then stick to it!

This chart compares two investors, both investing $1,000 in 1959 in a balanced investment option. The first investor stuck to their guns and didn't change their long-term plan. The second investor was spooked by every fall on the share market and switched into cash and waited for the market to recover before switching back. By doing this, they missed out on the full recovery in sharemarkets. The end result is telling. The first investor, the one with the long-term plan, ended up with about $245,000 at the end of June 2010 and the second investor $228,000.

3. While shares suffer occasional set backs, their long term trend has been up.

This chart tracks the performance of the share market since 1900. You'll see all crises - the crash in 1929, two world wars, the oil crisis in the 1970s and the financial crisis we've just been through to name a few. But the longer term trend is generally upward.

Unsure of where to invest your super?... get financial advice

Where to invest your super is one of the most important financial decisions you'll make. So if you're unsure, it could be time for financial advice.

And what better way to do this than through our own financial advice company, AUSCOAL Advisory Services (AAS). AAS Financial Advisers aren't paid commissions and you get free advice on simple questions about your AUSCOAL Super account, such as choosing investment options.

So what are you waiting for! Give us a call on toll free 1300 AUSCOAL (1300 287 262), Monday to Friday, 8am to 6pm, to make an appointment with an AAS Financial Adviser.

* S&P / ASX 200 Accumulation Index
^ SuperRatings Fund Crediting Rate Survey, June 2010

Past performance is not necessary an indication of future performance.

Copyright AUSCOAL Superannuation Pty Ltd - ABN 70 003 566 989 - AFSL 246864 | AUSCOAL Superannuation Fund - ABN 16 457 520 308 This information about the Fund is of a general nature. It does not take into account your objectives, financial situation or specific needs. Because of this, you should, before acting on any of this information consider whether it is appropriate for your objectives, financial situation and needs. You should consider seeking advice before acting on any of this information. If you have a choice about whether to join this Fund you should first consider our Product Disclosure Statement which you can download from this site, or call 1300 AUSCOAL to request a copy. AUSCOAL Advisory Services Pty Ltd ABN 22 104 151 635 is a Corporate Authorised Representative (number 240325) of Genesys Wealth Advisers Limited ABN 20 060 778 216 | AFSL No. 232686