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Bad month for SMSFs: some key things to remember


Amid reports about SMSFs being the ‘hardest hit’ by the recent brunt of share market volatility, we provide insights on the global economic and investment outlook

SMSFs and high-growth superannuation funds are likely to have felt the brunt of recent share market. 2015 saw subdued returns for investors as the global economy continued to grow and monetary conditions remained easy, but worries about deflation, plunging commodity prices, fears of an emerging market crisis led by China and uncertainty around the US Federal Reserve’s (Fed) first interest rate hike after seven years with near zero interest rates along with continued soft growth in Australia, saw volatile and soft returns from share markets.

Balanced superannuation funds had returns of around 5%, which was not disastrous given that returns have averaged 10.1% pa over the last three years, but still disappointing. 2016 has started with many of the same fears seen in 2015.

In saying this, despite all the talk of recessions and crashes, returns from a well-diversified mix of assets were still better than cash or bank deposits.

Key things for investors to remember

The bottom line

Global growth remains fragile and constrained and this is continuing to drive bouts of volatility in investment markets. Deflation still remains a bigger threat than inflation – this is flowing from the secular plunge in commodity prices but also from slower potential economic growth. It reinforces the view that interest rates will remain low for longer.

In this environment, diversification and active asset allocation are critical – the uneven and volatile return environment (with Australian shares underperforming again) provided a reminder of the benefits of diversification.

About the author
Head of Investment Strategy and Economics and Chief Economist at AMP Capital, Shane is responsible for AMP Capital's diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.
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