Why you didn't get the ASX 300 return last year?

Did you receive your 2016 annual statement earlier in the year and wonder why your super fund’s return failed to match the performance of the ASX 300 Index?

With Australia’s benchmark equities index rebounding in 2016 with a welcome 11.79 per cent annual return, you could be forgiven for being disappointed if your own super fund or investment portfolio didn’t record equally buoyant gains.

But before you start grumbling to your financial advisers, ask yourself this – did anyone ever actually say your portfolio would parallel the performance of Australia’s 300 largest public companies?

If someone did – and it certainly wouldn’t have been me – then that person is either a) sidelining as a psychic, b) using the DeLorean to visit the future with Doc and Marty, or c) looking for a career as a comic.

Poor financial advice is far from funny, but it would certainly be pulling someone’s leg to suggest you could ever guarantee to match or exceed the future performance of a variable index that no-one can predict, let alone control.

If that fact doesn’t ease the frustration you felt when you saw your portfolio return, then ask yourself this: why are you so concerned about a single year’s return on the ASX 300? How does that relate to your long-term financial goals?

Investing to build wealth and secure your financial future is a marathon, not a sprint. It is a multi-decade strategy.

It’s not simply a matter of bursting out of the blocks and charging full speed ahead, leaving nothing in the tank for later.

Long-term goals require preparation, patience and an ability to stay the course, even when the finish line is nowhere in sight.

Like a marathon, they require careful planning to ensure the pace you set at the beginning won’t leave you running out of puff before you reach the end.

They also require perseverance. It takes time to work up to running a marathon, just as it takes time to secure your financial future. There are plenty of milestones to hit along the way, but there may also be obstacles to overcome, such as a lower than expected return.

When an investment portfolio includes an allocation to growth assets such as shares or property, it is human nature to panic at the first sign of volatility and, rather than playing the long-game, decide to “cut your losses”.

The problem with making emotional decisions about your investments is that you are far more likely to end up investing at the peak of the market and selling at the bottom – thereby locking in the losses that would most certainly have been avoided by holding firm and weathering the storm.

The other thing to remember when pondering the state of your portfolio’s return compared to a benchmark index is that when a financial adviser puts together a plan for your goals, they are deeply committed to finding the best and most effective means by which you can reach them.

Rarely, if ever, would this result in them betting it all on red, so to speak.

As I mentioned earlier, financial advisers are not psychics. There is no way we could know, with certainly, that committing your entire portfolio to follow the fortunes of the biggest companies in Australia would pay off in any one particular year.

Doing so would be nothing short of gambling with your financial future.

A financial adviser worthy of the name would never bet a client’s entire portfolio on one idea, one investment sector, or one asset class (such as shares) for that matter.

While the ASX 300 is made up of the 300 biggest public companies listed on the Australian Securities Exchange, there are other investment sectors and asset classes (property, bonds, cash) which at any one time could either outperform or under perform the major players on the market.

And with Australia making up only 2% of the global economy, why limit yourself to investing domestically while ignoring global investment opportunities like Apple, Google, Amazon and Facebook?

A goal-focused portfolio is a diversified one, balanced across a range of companies, sectors and asset classes, and regularly reviewed to ensure it delivers a mix best suited to achieving your long-term financial aims.

The road you take to get to those goals is often long and rarely straight, with ups and downs along the way. The job of a financial adviser is to create a plan, set it in motion and help you navigate the twists and turns. If your goals change then the plan can change.

But if you start looking for shortcuts every time you compare your performance to others, you might simply lose your way and find yourself running into a financial dead end from which there is no return.


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