Members may have noticed an increase in share market fluctuations in recent times.
This follows falls in the US share market, caused by an increase in US inflation data and concerns that interest rates would rise faster than expected in the US.
To put this in perspective, the recent falls have effectively reversed the gains seen in international share markets since the start of 2018, and those in Australian shares since November last year. These falls come after a very strong January where AustralianSuper’s Balanced option returned 1.51% to be up 8.37% for the financial year to 31 January 2018. It also follows a very strong 2017 where markets delivered their best returns since 2003.
It’s normal for markets to fluctuate over short periods of time as investors anticipate and react to economic events like these.
Investing across a range of different assets (like shares, infrastructure, property, fixed interest and cash) helps us to manage market fluctuations over the long term. We’ve been preparing the portfolio for this increase in volatility by adjusting the allocation to these asset classes, and in December lowering the exposure to shares in our PreMixed options.
Share markets have been performing very strongly in recent years, and have been a major contributor to the strong returns in both the super and retirement income options.
The Balanced option returned 13.59% for the year and 11.11%pa for the five years to 31 December 2017. The Balanced option for retirement income accounts returned 14.88% for the year, and 12.36%pa for the five years to 31 December 2017.
Market fluctuations are a normal part of investing
Reacting and changing strategies because of the events of the past, week, month or even year can be costly.
Research shows that some investors may lose money when they change investments in reaction to short-term market movements.*
Investors may lock in losses and also miss out on the potential for higher returns by being out of the market when it recovers.
Since 2010, the investment returns of the Balanced option have increased members’ retirement savings by more than double – every $100 invested at the beginning of 2010 was worth $201 at the end of 2017#. This is despite a number of negative events that caused fluctuations along the way. Some of these include the slowing Chinese economy, Brexit and political uncertainty in the US and Europe.
Find out more
Read our investment update article to find out more about AustralianSuper’s performance in 2017.
* Sources: Owen Scott, AustralianSuper: The Age of Flawed Reasoning: The Rationally Ignorant, the Return Chasers and the Flight to Safety, Empirics 2017.
# Source: AustralianSuper. Investment returns of the Balanced option from 1 January 2010 to 31 December 2017. Investment returns are net of investment costs and taxes, but do not include the impact of administration fees that are deducted from member’s account balances.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.