What is a good investment return for your super?

You’ll often hear that super is a long-term investment designed to help you save for retirement.

That’s why you’d be hard-pressed to find a super fund that displays its monthly performance. And in fact, while we display our returns on a per annum basis, it’s usually more useful to both invest for, and look at performance over, a longer period of time.

But how long is ‘long-term’? Your definition will change depending on how far away you are from retirement, or how much time you’ll be spending in the market. We call this your ‘time horizon’, and it’s important because it may have bearing on the investment option or options you choose for your super.

An option designed for the long term will be designed to deliver on its return target or objective over a long time period. For example, Qantas Super’s Aggressive option is designed to deliver on its return objectives over a period of 10 years. This means that, rather than looking at how it performs year to year, it can be more useful to look at the option’s long-term performance to see if it’s delivering on its 10 year target.

On the other hand, if you’re edging closer to 60 years of age, your definition of long-term may only be four or five years, in which case you may want to look at an investment option designed for investors with a shorter time horizon.

Where your super is invested generally has the most bearing on your return. This is because investment options are purposely not created equal; in fact, each of our investment options has its own return objective and suggested investment timeframe, as we learned above.

In essence, this means each option has been designed to balance risk and return in different ways, through investments in different types and mixes of asset classes. They are designed to cater for different types of members, at different stages of their super journey, with different attitudes to risk and return.

So, you can’t compare Qantas Super’s Cash option, which has delivered a return of 1.7% p.a. (as at 31 October 2019) over three years, to the Aggressive investment option, which returned 10.6% p.a. (as at 31 October 2019) over three years, like for like.

While on first glance you may think that the difference between the two results is significant, it’s important to remember that they both actually outperformed their objectives and did what they were built to do.

The Cash option has delivered a strong result for members who want a low degree of risk and short-term returns, while the Aggressive option is performing well for members with a time horizon of at least 10 years in the market, who are comfortable with a high degree of risk.

With this in mind, a good way to measure performance is to look at whether your investment options have achieved their respective objectives.

The simple reality of investing in the market means that you’re subject to the ups and downs of the market.

While the investment options you choose can help you benefit from the highs and protect your investments from the lows, it’s still important to consider what a good return looks like for your super in the context of the wider market conditions and temper your expectations accordingly.

For example, a year full of global political turmoil – caused by a President’s late night tweeting, for example – will usually have some kind of impact on everyone. Likewise, a rising tide will generally lift all boats.

This means it’s important to look at the returns delivered by your investments in the wider context of the market’s performance.

Here at Qantas Super, we like to chat to our in-house investment team about what’s happening in the market to understand the stories behind how our super is performing.