We all know the old adage, 'it's not the size that counts'.
In this instance, we're referring to how performance can affect your superannuation fund, and how this in turn may change how comfortable you are later in life.
You see, it's not always about how much you put in – it's about how well, and when, it performs.
When you begin contributing to a super fund, such as those on offer at Virgin Super, your money isn’t just stored in a giant piggy bank, to be smashed open at a later date. Rather, your money is carefully invested in an attempt to grow your investments.
Some superannuation providers will invest in assets that offer the most appropriate investment mix for their customers’ life stage. Specifically, our LifeStage Tracker® option offers you a special program that will allocate investments on your behalf. When you are young and have plenty of time until retirement, the investments will be more aggressive, with the intention that they yield a higher, albeit more risky, growth.
As you approach retirement, the focus changes to preserving your superannuation balance rather than growth, so the investment mix switches to more defensive assets.
For those who want a little more control over their superannuation investment mix, our Virgin Super Plus plan lets you allocate your money as you see fit, choosing whichever asset class suits the current financial market, or your own intentions.
Why super performance matters
Let’s dig into some numbers to find out why.
$1,000 not invested
Say you keep $1,000 under the bed.
- At the end of one year, it is worth $1,000
- At the end of 10 years, it will still be worth $1,000
Say you invested that same $1,000 and achieved a return of 5% per annum, added yearly, after all costs and fees were considered.
- At the end of one year you would have $1,050
- At the end of two years, you would have $1,102.50 (5% of $1,050 is $52.50)
- At the end of 10 years you would have $1,628.89
The caveat is performance can also be negative. Say your investment loses 5% per annum, subtracted yearly, for the first 3 years, and then gains 5%, added yearly, for the next 7 years:
- At the end of 1 year you would have $950
- At the end of 3 years you would have $857.38
- At the end of 10 years you would have $1,206.42
You can see that there is a risk of losing money with investments, and there is also a risk of poor performance, particularly early in your investment timeline. But you can also see the potential gains thanks to compounding returns. It’s important that you keep in mind that superannuation is generally a long term investment and past performance is not an indicator of future outcomes.
How do I measure my performance?
Keep an eye on the year-on-year performance of your superannuation fund and the performance of the market. Most super providers will send yearly statements on your investment – and with the Virgin Super annual statement, you can see your earnings, fund performance, asset allocation and more.
On our website you can also check out our Annual Report, to learn about how Virgin Super has performed in the past year, and also our Market Report, which analyses the market as a whole.
So the next time someone tells you it’s not the size that matters, but how you use it, you can agree, knowing performance does count when it comes to super
How do you invest in your retirement?