Strong finish to 2023 investment year

There has been a significant uptick in market returns since we last reported to members. At the time, most members had experienced 3 consecutive months of negative returns. However, November and December saw a major turnaround with very strong returns both from equities and bonds. You’ll see from the graph above that Growth produced the best overall return this year (11.27%*) despite significant highs and lows from month to month. As is to be expected, monthly returns from Cash were the most consistent, but the overall return was much lower (4.01%*). It illustrates perfectly the concept of volatility. The greater the percentage an option holds of growth assets like shares, the more volatile the returns. Returns from options with fewer or no growth assets tend to be less volatile but lower over time. This same holds true if you look at annual returns over the past 10 years. Returns from Growth have been the most volatile from year to year but have highest returns overall (6.8% p.a.*). At the other end of the scale, returns from Cash have been the most consistent, but the overall return is much lower (1.9% p.a.*). Two takeaways:

  • You never know what’s around the corner. Past returns do not predict future performance – a poor month is often followed by a good month; a poor year is often followed by a good year.
  • Don’t chop and change investment options – saving for retirement is a long-term game where patience and sticking to a plan has historically been rewarded.

* After fees and tax at 28%.