Investors urged to think long-term
A survey by Intech, which compares the performance of Australian superannuation funds, has emphasised the importance for investors of taking a long-term view.
The Intech Super Survey evaluates 200 Australian superannuation funds in order to compare the investment performance of each fund over five risk categories, based upon returns generated after tax, fees and other expenses have been taken out. The data spans a five, 10 and 20 year period.
The returns of the median growth super fund, containing 60 to 75 per cent growth assets over the past five years, best illustrated the need for investors to take a long-term approach.
More importantly, when this period was broken down into two and a half year periods, it highlighted how short-term returns can be deceiving.
By looking narrowly at the two and a half year period ending March 31, 2003, investors would have been questioning the wisdom of their investment choices as the median growth super fund produced a poor return of -2 per cent per annum.
Conversely, investors would have been most pleased with the two and a half years ending on September 20, 2005, as it delivered a return of 15.2 per cent per annum.
However, over the entire five year period, the study shows the median growth super fund provided a return of 6.3 per cent per annum.
At a time when inflation increased by 3.6 per cent per annum, the figures reveal the super fund in question actually achieved its objective of producing a real return of between 3 and 4 per cent per annum, a conclusion that could not be reached by concentrating on the shorter-term results.
A look at returns by the report over a 10 year and 20 year period reinforces the importance of approaching investing with a long-term view.
The median growth super fund surpassed the inflation rate by 6.5 per cent per annum, returning 8.9 per cent per annum after fees and taxes during the past decade.
Similarly, over the past 20 years the specified fund returned 10.5 per cent per annum, which was 6.7 per cent per annum above inflationary increases.
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