The COVID-19 pandemic, which saw shares fall by over 30 per cent, has left members with median growth balanced funds (60-80 per cent in growth assets) returns of -1.3 per cent.
Chant West senior investment research manager Mano Mohankumar said under the circumstances of COVID-19, members only losing a small portion of their nest egg was a good result.
“While the median growth fund looks like returning about -1.3 per cent for the year, there will be some funds, as always, that will have done better, with some even delivering positive returns.”
Chant West expects the range of returns in the growth category to be between -6 per cent and +3 per cent, depending on the fund chosen by a member.
Mr Mohankumar also explained the importance of how money was allocated during the COVID-19 pandemic, with individuals who chose a growth-oriented approach likely to suffer stronger losses.
“The majority of Australians are still invested in traditional growth funds, but the increase in the number of lifecycle strategies – where your investment risk varies according to your age – means that some people (generally those born in the 1970s or later) have higher allocations to growth assets (85 per cent or more versus about 73 per cent on average for the typical growth fund) and they would have fared worse than the growth fund median over the year,” he said.
“On the other hand, older members (those born in the 1950s or earlier) in lifecycle strategies would have much less invested in growth assets, so they can expect to have done better than the growth fund median, with small positive returns in some cases.”
Mr Mohankumar believes it’s a year of three parts for members’ returns.
Over the first seven months to January, growth funds made steady progress and gained an impressive 6.4 per cent.”
“Then, in February and March, the seriousness of the COVID-19 pandemic and its likely impact on the global economy ravaged investment markets and growth funds fell a staggering 12 per cent.
“Since late March, we’ve seen a surprisingly strong sharemarket rally as investors have grown more optimistic. Coronavirus infection curves started to flatten around the world, governments began easing restrictions and economies tentatively started to reopen,” Mr Mohankumar concluded.
