Virgin Super Annual Report 2008

What’s happened to the markets?

World financial markets gave us all a bit of a white-knuckle ride in the past year. There were some major lows, which shaved off some of the good performance of the last three years.

Seeing the markets rise and fall as much as they have in the past year can be a bit hairy. Especially because all these ups and downs directly impact the dollar value of your super. The more exposure you have to poorly performing asset classes, the higher the chance is that your account balance will be lower than this time last year.

While this might mean that your account balance is likely to be close to or lower than what it was this time last year, it’s important not to panic. Sharemarkets function in cycles. After stretches of good performance, it’s not uncommon for some short term falls. You’ll also notice that these temporary downturns aren’t so obvious over the longer term.

If the recent market downturn has made your palms a tad sweaty, we thought we’d give you some information on why you shouldn’t panic.

Here at Virgin, we understand that super’s a long term investment and so too is your investment with us. We want to help you grow your super as much and as long as possible. And here’s how we’re going about doing it.

Virgin Super takes an index tracking approach.

Virgin Super’s strategy is to invest in Index Tracking underlying funds. A lot of super funds make investments which involve actively trying to pick stocks that will outperform the market. This is their way of upping returns. Our super sleuths have found that only a handful of active fund managers have consistently beaten index returns (after fees). So, we say, if you can’t beat the index, why not join it?

Why Indexing Works.

Index Tracking works by investing in a percentage of every stock on a particular index. This can give you some pretty sweet perks:

Lower costs: Index funds are usually cheaper to run than actively managed funds. Over the long term, that translates into more bang for your buck and more money in your pot.

Diversification: As index funds invest in every stock on an index, you’re automatically benefiting from diversification, and diversification is a great way to reduce risk.

Indexing keeps it simple: It ain’t always easy to pick the winning stocks. Even the professional guys regularly miss. Indexing takes the guess work out of investing so the upshot for you is generally better performance over the long term.