Tip balance in your favour
Despite many doomsday soothsayers, there are super options for a comfy retirement.
Despite many doomsday soothsayers, there are super options for a comfy retirement. CHIN up, people - seriously. Yes, the financial strife in Europe is wreaking havoc on our share investments. And yes, fears are growing about job security in Australia, albeit after the unemployment rate unexpectedly held steady last week.But don't prick your finger, don a wetsuit and paddle out at dusk in Newcastle to avoid a bleak retirement just yet: your super is holding up.Well, almost.Despite the S&P/ASX 200 index of leading shares shedding almost 15 per cent last year, number cruncher SuperRatings reports the median balanced super fund lost less than 2 per cent.The key word in the above sentence was "balanced". This type of fund "balances" higher-risk growth investments such as shares with lower-risk income-producing ones, including bonds and cash. Or it caps the growth assets at about 70 per cent.If that last bit was gobbledygook, or if you don't even know what your super fund is, for you, that news is good. If you failed to tick a box and elect a fund when you signed your super forms, this is what you'll have - along with about 80 per cent of the population.Just how good the news is will come down to whose balanced fund you're in. The best actually posted a 3.3 per cent gain, while the worst lost 5.5 per cent.The top five in 2011 were: LGsuper Accumulation - Conservative Balanced (3.28 per cent) First State Super - Health Super Division, medium-term growth (1.70 per cent) Vision Super - Balanced Growth (1.50 per cent) OSF Super - Mix 70 (0.91 per cent) and BUSS(Q) - Balanced Growth (0.88 per cent).The median fund has put on an annual average of 5.12 per cent over three years and is still clinging to positive territory, 0.25 per cent, over five years.Last year was the first calendar year of negative performance since the painful minus 19.7 per cent the year the global financial crisis broke, 2008. The only other negative year in the previous 10 was 2002, think tech bust, with minus 4.8 per cent.In the past year, Australian share funds predictably fared the worst, losing nearly 10 per cent international funds capped losses at 7 per cent. So-called growth funds dropped 4 per cent, while cash funds returned the most at 4.3 per cent.It all means not many of us are going to be taking our cornflakes with champagne in our sunset years but think carefully before you switch to cash.Such funds return little more than inflation most years, so in real terms your savings will go nowhere. Unless you capture the good years on markets, to counteract the bad, you will be unlikely to rebuild your fund and achieve your lifestyle goals. (Note: the advice changes if you are close to retirement, or risk averse for some other reason - and capital preservation is paramount.)Also think carefully before you sack your manager and go it alone with a DIY fund. No one cares more about your money than you do, true, but that doesn't automatically mean you'd manage it better.To set up a successful self-managed super fund, which has been a popular reaction to the crisis, gauging by the fact the sector now represents a third of Australia's super, $400 billion, you need:1. Investment nous.2. Time to apply it.3. A head for admin.4. A fund of $200,000 or greater to justify the cost.I'm not saying you shouldn't sack your manager, though - possibly you should. Compare its returns to the median ones I've quoted above and if they consistently fall short, switch to a better fund. You can find individual fund listings in Investor's sister publication, the Financial Review Smart Investor magazine.Substandard results over a prolonged period will impede your recovery and, ultimately, cost you big bucks.Follow this writer on Twitter @NicolePedMcK