March Madness: Super funds surge toward double-digit gains

Super funds have been on a positive trajectory, with March marking yet another month of strong performance.

Leading superannuation research organisation SuperRatings reports that the median balanced option achieved a 1.9% return in March. This brings the total estimated return for the first nine months of the financial year to 8.8%, setting the stage for a potential double-digit return by year-end, depending on the performance in the final quarter.

Meanwhile, the median growth option gained an estimated 2.3% for the month and the median capital stable option rose by an estimated 1.1%.* Past performance is not a reliable indicator of future performance.

The double-edged sword of international shares in super funds

Funds continue to benefit from their investments in international shares, which have shown to be among the highest growth opportunities. However, international shears also carry with them an inherent unpredictability since they can be impacted by a variety of global events—from economic shifts in major markets to political uncertainties.

“The COVID pandemic was a major event for financial markets around the world and while balances have recovered, we continue to see greater ups and downs in returns than prior to the pandemic”, said SuperRatings executive director Kirby Rappell. 

The importance of diversification

As we’ve seen, investing in international shares can offer high growth, but it also brings exposure to global market fluctuations. That’s why most fund options you’ll come across diversify their investments across different asset classes.

Even if some funds favour certain asset classes over others, there is still a degree of diversification present. For example, a fund might predominantly invest in international equities for growth potential, but it will also include bonds and domestic stocks to provide stability and reduce overall risk. 

Here’s how this approach impacts you:

• Risk management. A diversified fund spreads the risk, so that if one type of asset class experiences a downturn, the impact can be mitigated by other, more stable investments.
  
• Steady returns. In general, a diversified mix should provide steadier returns over time, without the ups and downs of a single, riskier investment (like international shares). This becomes particularly important as you near retirement age, where a single sharp downturn could throw a wrench in your retirement plans.
  
• Tailored to your needs. Diversification means there’s likely an investment mix that fits you like a glove - whether you're nearing retirement and prefer less risk, or you’re earlier in your career and can withstand more volatility for the chance of higher returns.

Getting to know the mix and approach of your super fund is not just for stock market pros. It’s an essential step for anyone looking to make sure their retirement savings are on the right track to meet their long-term goals. However, if you’re unsure about how to assess your super fund or make decisions regarding it, consider seeking professional advice.

For more insights on various super topics including how to find out how your money is being invested, and working out how much you’ll need to retire, explore our super guides hub.