Playing The Super Long Game

The future always looks brighter and less complicated at the start of a new AFL football season.

Hope springs eternal after months of trading, training and revamped game plans. Even pre-season games can fuel optimism while a bad result can easily be dismissed as worthy experiments with youth.

Coaches are quite happy to let the optimism build because all teams are equal on the score sheet – zero games played, zero games won/lost.

But the same coaches also understand – and extol – the virtues of "knowing where you are at".

In the management speak of US author and academic Jim Collins it is the challenge of "confronting the brutal facts while never losing faith".

For football supporters the brutal facts are impossible to ignore once the season proper kicks off – and for most supporters it quickly turns into a test of keeping the faith.

For superannuation fund members the "knowing where you are at" can be harder to get a realistic measure of.

Because while football teams are planning for the near or medium term they would never think about where the team might be in 30, 50 or even 70 years. Yet that is the challenge for a young person entering the workforce today who enjoys a normal working life and an average time in retirement.

The media of late has been commenting on the fact that super funds have had a strong start to the year with median growth funds up 10.5% so far this financial year and up 12.5% for the past 12 months to the end of February. *

Behavioral finance studies suggest that sort of good news often prompts people to check on their account balance while the opposite tends to be true when super fund return numbers are covered in red ink.

Not unlike the football fan’s response to a pre-season competition win or loss.

For people who pay for a financial adviser to be their "wealth coach" hopefully they have a good idea of how they are tracking toward the longer retirement goal and are at least having annual reviews to discuss progress or otherwise.

Research groups and the prudential regulator APRA do a good job of keeping score and publicly tracking how institutional super funds are performing. But with almost a third of the Australian superannuation system assets held within self-managed super funds it is much trickier to measure the real performance of SMSFs because of their highly individual nature.

Of course a good proportion of SMSFs- about 50% according to most market research studies – do use the services of an adviser to help with the fund’s portfolio construction and investment ideas.

But for the truly self-directed investor the public performance data published by the larger fund sector can be regarded as a valuable health check measure.

Benchmarking your SMSF performance against a target large fund – perhaps even one where you still have some money invested – is a cost-free way of making sure you are confronting the brutal facts of how your retirement team is tracking.

Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.