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.