Long term super returns to explode higher!*


Long term super fund returns are about to explode higher!*

Yes folks, we are about to enter a period where the longer term super fund returns will look very good indeed. At least – significantly better than they were in fund reports of just two years ago. Here’s the secret that will make long term super returns explode higher, and I’m going to share it with you before the rest of the country finds out!

long term super returns michaelsmusings kristina-flour-185592-unsplash

Long term super returns – The secret

The “trick” to past performance is the starting date – and it’s so obvious that sometimes I want to cry when I see how often otherwise logical, informed people manage to ignore this simple fact.

How does this “trick” work?

Well, most people receiving their super and investment account statements will look at the 12 month returns, and be either happy (2017) or not quite so happy (2018). Some funds will do better than others, but there is one thing that most will have in common – the 10 year returns will look rather awful. At least, awful in the sense that the returns will indicate a paltry increase over inflation. In some cases, even inflation will look like a good return!

The trick is all in the start date. Here’s why

Statements for 2017 had long term 10 year performance figures that started from 2007. 

So you have to ask yourself what the world looked like in July 2007? Well, it was booming! The Global Financial Crisis was around the corner but very few people even guessed that at the time. This means that investment markets were quite high – even compared with today’s levels. How high?


The main Australian share market index – the S&P/ASX 200 Index (with the market code “XJO”) hit a highpoint of 5998.9 in March of 2007. The same index reached a high point of 5901.5 for the month of March, 2017. In other words, a sharemarket investor’s capital went nowhere for the intervening 10 years.

long term super returns XJO index michaelsmusings

Add in dividends, and that rate lifts a bit – from minus 0.16% pa up to 4.38% per annum – but you can see that the 10 year picture was pretty dull.

What a difference a few years can make..

Move forward to March 2019 and the result is so very different…

At the 10 year starting point of March 2009, global share markets were looking simply awful. Global share markets had been falling since November 2007, and many people thought they would continue to fall even further.

The low point for the month of March 2009 for the main Australian share market was an index figure of 2867.

Today (the 14th March 2019), the index is at 6179.6. The 10 year rate of return is 8.18% per annum! Add in dividends, and the return over the 10 years moves up to 11.78% pa.

What a difference a couple of years can make!

long term super returns XJOAI index michaelsmusings
Look at how that 10 year return can vary. Just two years separates those long term return figures.

Smoke and Mirrors!

The examples I have provided above will hopefully help to illustrate the point that past returns can show huge variability over relatively short time periods. Therefore, you must always be careful when looking at past returns and making assumptions that this past performance will somehow be repeated into the future.

The Australian market regulator ASIC, many years ago released a Regulatory Guide to help clarify its approach to promoting past performance (the guide can be found here – RG53).

ASIC was trying to ensure that promoters didn’t take a period of good performance, and then promote that as being the likely future performance.

If there is one thing that financial advisers learn over years and years of research and experience – it is that outperformance tends to be temporary. This years losers were probably last years winners. It’s not an outright law – there are some investments and managers that show very good long term performance. But the chances are not good.

So buyer beware!

The Great Disclaimer, and others..

“*” Yes… the amazing “see below” note. Here is where I point out the obvious – the title of this post, and the initial paragraph, are modeled along the lines of the spruiker approach to investment return headlines. I’m basically having a go at the barrage of internet/ newsletter headlines that tell you great news about some fantastic opportunity that nobody else knows about. Yet you and I, dear Reader, know that no such opportunity is shared to the general public at large..

Please also remember the Great Disclaimer – nothing in this post or on this blog is to be taken as personal financial advice. It is merely my observations on money and markets and the world from a financial planner’s point of view – and my view is peculiar to me, so you shouldn’t even take it as being the view common across financial planners generally!

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Whispering lips image : by Kristina Flour on Unsplash


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