Your Returns Don't Excite Me... A Story About Stockmarket Returns And The Value Of Compounding

The below is a copy of a marketing email we are sending out to potential customers tomorrow morning

. Enjoy!

Your Superannuation account - now with 25% more money!

If you think the subject of this email is a bit cheesy, we agree with you. That doesn't change the fact that if you'd invested with us since our inception in March 2007 your portfolio would have performed +25% better than the ASX 200 Accumulation index. Cheesy or not we're sure you'd agree +25% outperformance is nothing to sneeze at.

Since March 2007 the ASX 200 including re-invested dividends has lost -14.78% while our Managed Accounts have delivered a return (net of fees) to our clients of +10.34% as at 30 June. (We're up a couple of percentage points since then)

How much more secure would you feel if your super balance was 25% higher than it is today?

If your portfolio has performed better than that over the past 4 years, stop reading, we don't want to waste your time. But if your share portfolio or super account is performing poorly then read on. We'd like to share a story with you about share market returns and the importance of compounding.

Your results don't excite me...

We recently received an enquiry through our website about our services. This person had their money invested with another managed account provider over the past 6 years; and after some disappointing returns was looking for a new advisor for his managed investments.

Upon contacting the gentleman regarding his enquiry we discovered that his current managed account provider had lost him -50% over 6 years. During the course of our communication (as is fairly common) he asked to see our performance history. We duly directed him to our website which shows our performance history since inception in March 2007 to June 30 2010 of +10.34%.

He replied asking us for a detailed review of his current portfolio including his current positions (most of which were heavily underwater) and commented that our returns didn't excite him'. Needless to say this left us a little puzzled. Here was a man whose portfolio had been halved by his current advisor telling us that our (significantly better) returns didn't excite him. Based on the size of his portfolio if he had invested the same money with us his portfolio would have been approximately 60% better off (which equated in his case to around $240,000!)

Do you find 25% outperformance un-exciting?

The gentlemans enquiry did however get us thinking...Perhaps you too feel unimpressed by our results? Perhaps you have received our emails in the past and done nothing with them. Perhaps on the face of it returning +10% over 3.5 years to our clients doesn't seem that big of a deal... We would like you to consider the 2 following points...

1) Returns (specifically those derived from the stock market) are relative to overall market performance. In our case the benchmark we chose was the ASX 200; since March 2007 the index and performed much worse than our managed accounts.

So what's the big deal I hear you ask? +10% over 3.5 years still isn't great... that brings us to our second and most important point.

2) The important factor that investors forget when looking at investment returns is compounding. Specifically the positive effect compounding can have by starting with an account balance 25% higher!

All super funds whether self managed or not usually have an amount invested directly in stocks. They are invested in the market over the long term, regardless of the specific investment strategy used. Our high conviction, active, risk adjusted investment methodology has stood up to some harsh tests over the past 3.5 years and delivered great results for our clients. That combined with our significant outperformance is why we are confident of being able to continue to deliver great results for our clients.

How much more could your super be worth?

What returns could your super portfolio generate from now if its balance were 25% higher? What would the compounded effect of that be over time? We challenge you to look at the returns of your portfolio, compare them to ours and asses if your money is working as hard as it should be for you.

Call us today on (03) 8602 1702 to open a William Shaw managed account and let us make your money work harder for you.

Yours Faithfully

Hayden Kerr and Shawn Uldridge

(03) 8602 1702

p.s. as a point of interest the 2010 fund manager of the year delivered negative 4.95% to his clients since late 2007. Over the same period we delivered +15% more for our clients.

by: Hayden Kerr

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