The headline in the Courier Mail today read 'Super Run for Funds in August'.
The article then went on to espouse the great returns for super funds including:
- Australian share funds an average return of 17.9% for the year to 31st August 2006
- International share funds an average return of 13.1% for the year to 31st August 2006
- Listed property trust funds an average return of 15.8% for the year to 31st of August 2006
What great results for investors! Or are they?
Have a look at these figures relating to the overall performance of the market during these times.
The ASX300 share fund had a return of 19.59% for the year to 31st August 2006
International share index had a return of 14.5% (50% hedged) for the year to 31st August 2006
Listed property trust funds index (ASX300) had a return of 20.94% for the year to 31st of August 2006
In each case the average super fund SIGNIFICANTLY underperformed the simple index return.
These results even surprised me. Over a 1 year period I would have expected that funds got closer to the index than that. What the results clearly show is just how tough it is to beat the market over a short time period - and over longer time periods the index will win by more and more. It also shows that we should not be complacent even when investment returns are booming. While the absolute returns of the super funds are fine, underperforming the index by a margin is not acceptable, because the option is always there for investors to use an index fund.
The performance data for the superannuation funds was taken from the superratings website.