Newsletter   •   Quarter 4   •   2021

Woolworths Group Retirement Fund

Portfolio Performance

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The chart above shows the investment returns of the Woolworths Group Retirement Fund’s High Growth Portfolio, in which most members are invested. All returns are net of fees. These investment returns are compared to inflation and to the Balanced Index. The Balanced Index represents the market returns of a similar investment strategy – approximately the returns you would earn if your savings had been invested without using investment managers to make active investment decisions.
When investing retirement savings, THE basic aim is to ensure that the PURCHASING POWER of YOUR savings is maintained and grows over time.

Providing for your retirement

Retirement savings should aim to achieve an investment return that is above inflation over the long term (ten years and more) as well as to grow the overall value of your savings.

The growth of your retirement savings also depends on:

  • the size of your contributions to the retirement fund
  • how long you continue to make contributions.

The Fund’s High Growth Portfolio

Over the past ten years, the returns of the High Growth Portfolio have been comfortably higher than inflation, indicating that the portfolio is successfully maintaining its purchasing power over the long term.

You can see that the one year return of the High Growth Portfolio is 23.8%. Please note that this is an unusually high return and indicates extreme movements in financial markets caused by the uncertainty surrounding the COVID-19 pandemic. We continue to face uncertainty regarding the pandemic as well as other geopolitical and economic issues. Because of this, extreme market movements may continue and you may experience low or negative returns over the short term, as happened in March 2020. There is little that can be done to control these short-term movements but over the long term, investment returns tend to be more stable.

For this reason, it is imperative to remain focused on long-term investment returns.

You can do this by:

  • investing in the High Growth Portfolio
  • maintaining your contributions to the Fund
  • staying invested.

What could happen if you try to control the short term outcomes

We stress the importance of keeping your retirement savings invested in an appropriate strategy such as the High Growth Portfolio. Doing so makes a big difference to the savings that become available to you when you retire.

To illustrate this, the graph below shows the growth in the retirement savings of three hypothetical members*, over a period of 14 years. This period includes two major market crashes – the global financial crisis of 2008/2009 and the COVID-19 market crash of March 2020.

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All three members start off with zero savings. The table below shows what each member is left with after saving for retirement over the 14 years.
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* We have assumed that all members earn R10 000 per month at the start of the period, increasing with inflation every year and that they contribute 18.5% of their salary to the retirement fund (after administration fees and costs)

There are three major learnings from this example:

  • Over the long term, you are most likely to save the most if you stay invested in the High Growth Portfolio, even if there are market crashes.
  • Investing in cash is not a good strategy, although your savings will not immediately be affected by a market crash. However, you will accumulate relatively little savings in the long term and also, your savings will not be protected against inflation.
  • The worst option is to move your savings from the High Growth Portfolio into cash at the time of a market crash. This is because the decrease in value from the market crash is locked in when you switch to cash and you will not participate in the market recovery that is likely to follow the crash. Also, the low returns on cash are not enough to restore the value of your savings to where it was before the crash.

These examples are simplistic, but there are too many possible scenarios to show them all.

The Woolworths Group Retirement Fund has a carefully considered investment strategy that is designed to maintain and grow your retirement savings over the long term.

Our strategy takes into account the possibility of severe market movements and market crashes.

Because a consistent, diversified and disciplined strategy is followed, it allows your savings to fully recover from any short- term or temporary losses and TO continue growing.
Look after the future you!

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