This is why we show the ten-year returns first, which is where we believe your focus ought to be when looking at the investment performance of your retirement savings.

Over seven years or more, the Balanced Growth Portfolio has earned returns higher than inflation, but has missed the 5.5% above inflation target. The main reason for missing the target has been the underwhelming performance of South African equities, which form a substantial part of the portfolio.

Over the short term, up to five years, the Balanced Growth Portfolio has shown stronger returns, but remember that:

In his book 'Thinking, Fast and Slow', the economic Nobel laureate Daniel Kahneman wrote 'The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.'

Of course, it is relatively easy to explain what has happened in markets and soon ChatGPT will be able to do this better than most humans.

The forecasts made by so-called market experts in early 2023 reveal the folly of forecasting investment returns. At that time, global equity and bond markets had delivered the worst returns in decades (global equity -18.3% and global bonds -17.2%, both in US$ for the 2022 calendar year).

The reasons given for these weak returns focused on concerns over high inflation, fears of a global recession and the negative impact of the Ukrainian war. On the back of these concerns, most market experts warned investors that 2023 would be a tough year.

Actual 2023 returns were among the best in decades (global equity 22% and global bonds 4.0% in US$). These returns were up despite the Israel–Hamas conflict and investor concerns over global inflation.

The mistake that most market experts made was to underestimate the resilience of the USA consumer, and the USA economy which could weather the significant increase in interest rates without going into recession.

Something that almost all experts missed was the release of large language models (such as ChatGPT), which boosted the share prices of the so-called Magnificent Seven (M7) – Apple, Amazon, Alphabet (Google), Meta (Facebook), Microsoft, Nvidia and Tesla. On average, these companies were up 111% in 2023 and made up close to 40% of returns for global equities.

Given how wrong experts were in predicting the expected performance for 2023 (and getting this equally wrong in previous years), it questions how much reliance we should place on their ability to accurately predict expected performance in 2024 and even the medium-term beyond 2024.

Retirement funds like the Woolworths Group Retirement Fund are restricted to investing a maximum of 45% offshore. The remaining 55% has to be invested in South Africa.

Some companies on the local stock exchange, such as Richemont, British American Tobacco, AB InBev, Anglo American, BHP and Naspers/Prosus, make a substantial portion of their money overseas. Therefore, events in the local market strongly affect their investment returns.

It is essential that you focus on the long term. If there are losses over short periods, focus on the long-term returns. It is understandable that you would feel anxious if your investment returns were negative over the short term. But don't let short-term fluctuations steer you off course. Think of it as looking at the whole book rather than a brief chapter.

It is comforting to know that the trustees of the Fund put much effort into constructing well-diversified investment portfolios designed to be resilient over a wide range of market conditions.

The trustees and the investment committee follow a solid process for determining the Fund’s investment strategy. This should lead to better returns over long periods.