MONEY MATTERS MONDAY 16TH JULY 2018
A Year of Healthy Returns
With June 30 behind us what did our investments and super funds earn over the last financial year? In fact returns varied widely. Whether our super funds earned three, six or ten per cent will be determined by the proportions we chose to have invested in growth versus defensive areas.
The returns from investment sectors were mixed.
It was not a year to be too cautious. Australian shares had another good year. The All Ordinaries Total Return Index which includes dividends earned 13.7 per cent. Its compound return over the last five years has been 10.3 per cent per annum.
Market sectors produced differing results. It was a poor year for traditional investors holding quantities of bank shares. Financial stocks on average earned just 1.7 per cent. Meanwhile mining companies earned 40.3 per cent and the less researched small company sector made 24.3 per cent.
Overseas shares also did well. The MSCI World ex Australia Index returned 11.5 per cent excluding currency effects (or 15.4 per cent including them). Its five-year average is 12.9 per cent per annum. Returns varied greatly between countries.
The US Dow Jones made 13.7 per cent, Asian shares 14.1 per cent, the Hong Kong market 12.4 and Japan 11.3 per cent. However the British market only earned 4.4 per cent, the German index lost 0.2 per cent and Chinese shares lost 4.3 per cent.
Property funds traded on the Australian Stock Exchange earned 13.2 per cent while similar overseas property assets made 6.4 per cent. Returns from commercial property in Australia that is not traded on a stock market are only updated to 30th April. For the year to that date they made 12.9 per cent.
When we look at defensive investments we see a much more modest picture. Fixed interest in Australia earned 3.1 per cent while cash, measured by the bank bill index, returned just 1.8 per cent. Overseas fixed interest yielded 2.5 per cent.
Most super funds, including the accounts of people who have not chosen a fund, own a mix of all investment areas. The final super fund earning figures aren’t in yet but we can estimate them based on the returns of managed funds holding a similar mix of investments.
According to Lonsec Research managed funds with around two-thirds growth assets returned 10.1 per cent while those with half growth and half defensive made 7.9 per cent. Cautious funds with at least two thirds defensive assets earned 5.8 per cent.
To estimate our super fund returns we must deduct up to one per cent from those figures for the tax funds must pay. Doing so gives us estimated net returns that should still please most investors.
This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.
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