Recent reports showing that 'balanced' super funds have lost more than 17% of their returns over the last 12 months are, of course, distressing, especially for those who are nearing retirement.

Members have been asking GESB when we are likely to see the bottom of the market. Sharon Hicks, chief investment officer at GESB, says: "It is hard to predict when the bottom of the market will be reached. We advise members that the best approach is to adopt an appropriate long term investment strategy and stick to it".

GESB's senior investment strategist, Ralph Leib, explains the benefits of continuous investing:

"Investing in superannuation, in general, is for the long term.  As super contributions are made every two weeks, large falls in equity markets enable new contributions to purchase more units at lower prices. When the economic environment improves and equity markets rise, these continuous contributions will add significantly to members long term wealth creation objectives."

To illustrate this point, the chart below (Fig. 1) shows the previous bear market using the US S&P 500 index which peaked at 1527 on 24 March 2000. The chart also shows when the S&P 500 returned above the 1527 level (a period of just over six years). If US$100 had been invested in the market every two weeks from the March 2000 peak, all the way down through the market bottom and back up to the index levels seen again in May 2007, the simple returns earned on average contributions over this period would have been approximately 32%.

Fig.1 - S&P 500 Index (US$)

Fig. 2 - Bear Markets in Australian shares since 1960

Source: Bloomberg, AMP Capital Investors, GESB

Disclaimer: Past performance should not be relied on as an indication of future performance.
This information has been prepared for general information and without taking into account any particular person's investment objectives, financial situation or needs. To obtain advice for your particular circumstances, you should consult a suitably qualified adviser. This information is provided in good faith and believed by GESB to be accurate at the date of issue. However, no representation or warranty is made as to the accuracy, reliability or completeness of this information. Benefits can only be paid in accordance with the Act and Regulations. Except to the extent that statutory liability cannot be excluded, GESB accepts no liability (including liability to any person by reason of negligence or negligent misstatement) for any loss arising as a result of any person relying on such information.