Ouch. Just as investors were coming to terms with the fact that their super had gone backwards over the past year, the sharemarket got another case of the wobbles. Instead of starting the new financial year with a bounce, super funds are likely to record another month of losses, bringing the total losses over the past 13 months to nearly 10 per cent.

The financial year returns for Australia's major super funds show widespread losses, with the most popular investment options down an average 6 to 7 per cent. Researcher SuperRatings reported an average loss of 6.39 per cent, after fees and taxes, for the 50 largest, balanced investment options in super funds.

SelectingSuper reported an average loss of 7.5 per cent for the default options of major workplace super funds - which includes some higher-growth options than are covered in the SuperRatings figures.

Either way, the news is not pretty. In the SuperRatings survey, not one fund managed a positive return for the year, with the best performer - Vision Super's balanced-growth option - losing 1.7 per cent. SelectingSuper had one fund in positive figures - AXA's Guaranteed Plus option in its master fund, which returned 4 per cent - but as the name implies, this is a conservative investment, invested in fixed-interest and cash, and can't be readily compared to the average, balanced fund.

"It was the No. 1 fund over the past year by 5 or 6 per cent," says SelectingSuper research manager Andrew Keevers. "But it is down near the bottom over longer time periods."

For those fund members invested outside the balanced option, the news was mixed. SuperRatings found growth options (which typically have 76 to 90 per cent in assets such as shares and property) lost an average 8.8 per cent for the year, while capital-stable options lost 0.3 per cent, and fixed interest and cash options were up 5.1 and 3.8 per cent respectively. If you had chosen an all-Aussie-shares investment option, the average loss was 12.8 per cent, while international share options lost an average 17.3 per cent and property options lost 18 per cent.

Given what has been happening on investment markets, it is not surprising that most super funds have gone backwards. But the results will still come as a shock to many investors.

A recent survey by the consulting firm Mercer found 72 per cent of people surveyed in June 2008 expected their super balance to be higher on their next statement, with 20 per cent expecting it to be much higher.

David Anderson, the Asia Pacific leader of Mercer's outsourcing business, says this shows many investors haven't connected the dots between sharemarket performance and their super. Almost two in five surveyed believed investment market movements would have little or no impact on their super and 29 per cent were unsure of their investment strategy.

"Several surveys have shown a disconnection with people's attitudes to super," says First State Super chief executive Michael Dwyer. "We need to tell them that super is like a basket of shares, property, bonds and so on, packaged in a tax-advantaged environment. It's not immune from what's happening in the wider economy."

Vision Super's chief executive, Rob Brooks, says the most important thing to understand is that super is a long-term investment. "We know markets will come back. We just don't know when. The amazing thing isn't that markets are falling but that they have stayed up for so long," he says.

AMP Capital Investors head of investment strategy Shane Oliver says balanced super funds should expect losses every few years (SuperRatings managing director Jeff Bresnahan estimates one in six years on average). Oliver says this year's losses should be viewed in the context that they follow several years of high returns.

"The average super investor may have lost 6 to 8 per cent over the last year, [but] the last five years have seen their super savings grow by around 57 per cent," he says.

The graph demonstrates the long-term performance of a balanced super fund. Real median returns are used since 1982 and a simulated portfolio estimates the likely returns between 1929 and 1982. "Between June 2003 and June 2007, the median balanced fund had a real return over 12 per cent a year, whereas the long-term average ... since 1901 was just 5.5 per cent," Oliver says. "In other words, the average balanced fund in [recent years] experienced ... rates of return well above what may have been reasonably expected."

Dwyer says investors, rather than panicking about losses, should use them as a means of ensuring they understand their fund's investment strategy, where their savings are invested and the fund's likely long-term performance.

Bresnahan says the average balanced fund tries to achieve a long-term return of about 3.5 per cent above inflation - which means the 10-year return of 7.57 per cent for the funds in SuperRatings' survey is much more realistic than the double-digit returns of recent years.

Funds with more money in growth assets should achieve a higher long-term return but with more swings and roundabouts along the way. Funds with more conservative strategies will have a smoother ride but return less over the long term.

Bresnahan says the funds at the bottom of the pack during the past year have undoubtedly made several poor investment decisions. But the financial turmoil has taken its toll on the good funds as well as the not-so-good. Members need to look at what has driven short-term performance and whether this year's results are simply a reflection of a tough market, or part of a longer-term performance problem.

Bresnahan says last year's performance came down to two key variables. First, this was not a year when funds were rewarded for owning shares. Generally, the higher the allocation to shares, the harder falling sharemarkets hit the fund.

Funds that held more unlisted assets - such as direct property and infrastructure - also fared better, as these investments were less battered and bruised by the sharemarket turmoil.

Dwyer says it is also important to understand how much your super is costing you - particularly when your fund is losing money. "Fees can make an enormous impact," he says.

"When members get their statements, it will set out in dollar terms their opening balance, their closing balance, and what they have paid in fees. Two per cent doesn't sound much but it can turn out to be a sizeable sum when it's spelt out in dollars and cents. When all funds are negative, fees can be a major differentiating area."

Bresnahan says members should ask why this is so, if they are paying more than 1.5 per cent in fees for their super, or 1 per cent if they have larger account balances. Dwyer says First State charges about 0.3 per cent, plus a $52 annual administration fee for its balanced fund, among the lowest rates on the market.

He says Superannuation Minister Nick Sherry's goal of bringing average fees down to under 1 per cent is achievable, though he questions whether the will exists within parts of the super industry.

It's a tough sell in this market but Dwyer says investors should also be focusing on more fundamental questions, such as whether they are saving enough to fund the retirement they want.

The Mercer survey found almost 40 per cent of Australians are not planning effectively to have enough retirement super savings and a surprising 27 per cent of people aged 50 or more had given it little or no thought.

"Saving for retirement is about sustained commitment, not knee-jerk reactions to market volatility," Anderson says. "The current 9 per cent super-guarantee contribution will simply not be enough for many Australians to retire in comfort, let alone be self-reliant."

"At times like this, asset prices may be more attractive," Dwyer says. He says fund members should be seeking advice on making the most of their super, rather than on short-term returns.