The December quarter saw a sharp drop in the value of shares which resulted in negative performances for the Growth and Balanced Funds. Strong performances in earlier times, however, ensured that returns remained positive in periods greater than 1 year. While our funds performed better than most for the quarter (reflecting our more conservative investment philosophy), negative performances are never nice to experience and can be frightening. However, they need to be kept in perspective i.e. remember the great and stable returns leading up to them! Diversification benefits were also evident in the quarter as gains on income assets (bonds) partially offset losses on growth assets (shares).
It’s important when there’s been a significant drop in the markets not to be alarmed. Remember that returns are generally positive over longer time frames. Interestingly, since 1 January this year share markets have rebounded significantly (by about 7% in January). What caused the bout of volatility throughout the December quarter? Even though a number of the concerns had been around for a while investors got more nervous in the quarter about some items including China and U.S. trade war developments, Brexit, global growth and monetary policy (particularly in the U.S.).
Large fluctuations in asset prices will inevitably occur again. In this more volatile environment, we remain extra vigilant, diversified and cautious in our approach to investing your monies.
Investment returns at 31 December 2018, before fees and tax:
| Fund | 3 months | 1 Year (p.a.) | 3 years (p.a.) | 5 years (p.a.) |
| Growth Fund | -5.7% | 1.3% | 7.6% | 8.2% |
| Balanced Fund | -3.7% | 1.6% | 6.5% | 7.1% |
| Income Fund | 0.6% | 2.2% | 3.8% | 4.4% |
We have two important messages for you. Firstly, again, don’t panic and secondly make sure you are in the investment fund that best suits you. Changes in the investment markets don’t change your investor type. Changes in your personal circumstances are what influence your investor type.
Over time investment markets will have their ups and downs and occasionally the downs are large enough to result in a negative return. The December quarter is just one quarter. In the last 20 quarters (5 years), our Income Fund has had 18 positive quarters, the Balanced Fund had 17 and the Growth Fund had 16.
