Will your super returns be in the black at the end of this calendar year? After a haphazard year in which many months finished in negative territory, that is a possibility.
But … the answer depends entirely on what happens in the share market over the next six weeks.
It’s been a rough year for super funds given the ongoing effects of the pandemic, rampant inflation and an energy crisis caused by the Russian invasion of Ukraine.
With all that considered, funds posting a modest loss for the year would be understandable. If that were to happen, it would be the first time super ended a calendar year in negative territory since 2011.
But super’s bounce back in October has some analysts predicting a positive return for 2022.
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Figures from SuperRatings show the median balanced option (where most people have their funds) generated a return of 3 per cent in October.
That result was heartening given the drop in September.
SuperRatings director Kirby Rappell says the results in September (-3.1 per cent for the average balanced option) and October highlight the importance of sticking to a long-term strategy.
“It is pleasing to see a 3 per cent return for members over the month of October,” he says.
“However, it really reinforces the importance of setting, and sticking to, a long-term strategy as members who may have panicked and switched when returns were down last month may have missed out on this recovery.”
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Although that result still represents a 5.1 per cent drop in the 12 months to 31 October, Mana Mohankumar, senior investment research manager at research provider Chant West, believes super returns have a good chance of finishing 2022 in the black – as long as the share market keeps performing the way it has been.
Australian and international shares typically make up around 55 per cent of the total investment for a standard balanced option, meaning the ups and downs of the share market are mirrored in superannuation returns.
“Over the month, Australian shares surged six per cent while international developed markets were even stronger, advancing 7.2 per cent and 7.8 per cent in hedged and unhedged terms, respectively,” Mr Mohankumar says.
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“Despite the challenging geopolitical and economic backdrop, if we take into account November to date, the median growth fund is more than 11 per cent ahead of the pre-COVID high that was reached at the end of January 2020.
“This should be comforting for fund members. More importantly, funds are continuing to meet their long-term return and risk objectives.”
How did your super fund perform in October? Do you follow the monthly reports or adopt the set-and-forget approach? Let us know in the comments section below.
