Not surprisingly, your balance would have had a rollercoaster of a ride.

If your fund's performance had tracked the return of the median balanced fund posited by superannuation researcher SuperRatings, your $100,000 would have fallen to $92,141 by February 2003 and then enjoyed a sustained rise to reach $169,214 in October 2007.

But then your balance would have plummeted to $126,865 by February 2009 as the GFC took its toll, before climbing to $159,655 by the end of January this year, according to SuperRatings' latest
monthly report.

SuperRatings defines a median balanced super fund as one with a 60-76 per cent exposure to growth assets. Its research shows that over the past 10 years, the median balanced fund returned 4.88 per
cent a year.

This 10-year rolling return is unquestionably modest, particularly considering the impact of inflation.

However on a positive note, there is little doubt that the rocky ride of this initial $100,000 super balance underlines some valuable lessons for investors including:

•  The importance of making additional contributions to help store up a super balance during difficult and particularly volatile periods. And, of course, regular contributions enable fund members to buy more units or investments in their fund when prices are down.
  
  
• The dangers of panicking and shifting to an all-cash portfolio after a sharp fall in the markets. Imagine if an investor switched entirely to cash in early 2003 only to watch investment markets turn upwards for the next four years or so in the run-up to the GFC. Even investment professionals rarely succeed in consistently picking the best times to sell or buy.
  
  
• The potential benefits of being flexible about choosing the date of your retirement - if you happen to be in that fortunate position. Ideally, a member should not retire and start drawing down on their superannuation pensions shortly after investment markets have abruptly fallen.

A key challenge for investors is to remember such lessons when the markets eventually turn upwards. Sadly, many investors have surprisingly short memories.

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
21st February 2012