Be Prepared

Most super fund members invested in their funds' balanced or growth investment options - that's more than 80% of fund members - would be expecting a negative return for 2007-08. 

 

Unlike when most balanced options last experienced a negative return (for 2001-02 followed by a very small positive return for 2002-03), the majority of members are well informed throughout a financial year about how their fund returns are progressing. 

 

This is largely due to funds making their latest returns available on their websites throughout the year and funds becoming much more open about their operations since the introduction of super fund choice in 2005. And then the announcements in the 2006 federal budget for the revamping of super led to many more members becoming really interested in their super. 

 

Further, the competing super fund research agencies such as SuperRatings are keeping members right up to date about how their super funds are performing each month compared to their competitors. 

 

Most members are likely to recognise that the expected negative annual returns of their balanced or growth portfolios are really - in the majority of cases - a reflection of what has happened in the investment markets and, in turn, a reflection of their portfolio's asset allocation. 

 

And as the managing director of SuperRatings, Jeff Bresnahan, says: The way balanced options are constructed means that, on average, members can expect a negative result every six years. 

 

Nevertheless, it can make much sense to ask a skilled financial planner to fully explain the reasons for your own fund's performance - particularly if you have any concerns. Your adviser is most likely to focus on how your fund has performed over, say, the past five years - not just the past 12 months, which can give a misleading impression. 

 

The receiving of your annual or six-monthly fund statement may also serve as a prompt to discuss with your adviser the appropriateness of your fund's asset allocation, given your personal circumstances, including your tolerance to risk. 

 

When you understand why something is happening - in this case negative fund returns - and you were expecting it well in advance, it can be easier to cope with in a reasoned, logical fashion.