by Maureen Jordan
In the age of Google, we really think we know everything, or can find it quickly. The recent super returns, however, might prove the old saying: a little knowledge is a dangerous thing.
This was made clear to me after seeing the Chant West chart of super returns, since super became compulsory in 1993. As I looked at the chart, I thought how it would have been useful to show many a panicky Australian during those bad years of the GFC.
Then, people were so worried, they were exiting the stock market, putting their money into cash or term deposits for safety. Then, super funds lost 6.9 per cent in 2008 and 12.9 per cent in 2009. Many older Australians, in particular, wanted out of super funds as well. Of course, these were falls for the median returns. Some people had much bigger or smaller drops.
This panic was fed by scary news stories and I have to admit I was a little spooked at times though I was consoled by the words of Peter Switzer, who was a calming voice in the wilderness. He argued the stock market would rebound and that quality funds and investments would eventually show that bad news eventually gives way to good news.
He also pointed to the track record of good super funds and explained that panic was understandable but unnecessary.
The Chant West chart showed me that since 1993, the median growth super fund has had only three negative years! They were 2001-02 (that was the dotcom bust year, where the return was -3.3 per cent). Then 2007-2008 brought -6.9 per cent, while 2008-09 was the shocker of -12.9 per cent.
Since then, we’ve had five positive years, where the average was close to 10 per cent per annum.
As I pondered those very good returns, I thought about those who took their own counsel and played it conservatively. I must admit if I wasn’t a financial adviser myself and had access to experts I respect, I could have been easily spooked and played it safe.
That said, I always recall a chart that Vanguard put out showing what happened to $10,000 from 1970 up to 2009, that bad year of the GFC.
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