It may not seem like it, with the recent falls on the ASX, but super funds are on track for healthy returns in the 2013 financial year.
Despite the All Ordinaries Index (Index:^AXAO) (ASX:XAO) falling by more than 10% since mid-May, over the past year, the index is still up more than 14%, not including dividends. According to research house SuperRatings, the average balance fund is on track for a gain of between 13 -14% this financial year.
Research manager at SuperRatings, Kirby Rappell said, "At 13 per cent, it would be the sixth-highest returns and similar to those of 2003-2007, which were during strong economic conditions prior to the GFC."
Funds with exposure to international shares have likely done even better, with the Dow Jones Index up more than 17% and the S&P 500 an astounding 19.7%. Add in the around 10% gains from the falling Australian dollar, and those funds are well ahead of locally only focused super funds.
The problem for Australian investors now is where they can go to replicate that growth in the year ahead. With the mining boom coming to an end, and other sectors such as retail, media, banks struggling with low levels of growth, it might be hard for investors to know where to look.
As we have suggested previously here at the Motley Fool, strong Australian companies that will benefit from the falling Australian dollar would be close to the top of the list. These include companies such as CSL Limited (ASX:CSL), QBE Insurance (ASX:QBE), and BHP Billiton (ASX:BHP).
Some economists are already predicting that Australia could be headed for a recession, as the mining boom tapers off and no other industry steps up to take its place. With offshore revenues making up a big chunk of earnings, all these companies are protected to a certain extent from the falling dollar, as well as the risks of a recession in Australia.
Foolish takeaway
The best protection for your portfolio is to have a well-diversified selection of good quality companies. That includes holding companies with offshore earnings, which could see individual investors beat the returns from the average Australian-focused share fund.
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More reading
- Prices set to soar
- Three reasons the falling Aussie dollar is GOOD news
- Should you buy shares today?
- Cheering the end of QE
Motley Fool writer/analyst Mike King owns shares in CSL, QBE and BHP.
