April, 2017 | Slack Investor

Superannuation … Engage! – Part 2

You have been busy (and definitely not Slack) and gone through the paperwork that combines your super funds into one fund that you will keep for your working life. You have probably found an Industry Super Fund provider with established performance and low fees … Sorted!

Slack Investor is proud of you!

However, a little more work is required. The default investment option for most funds is called “balanced” – that sounds pretty cool – who wouldn’t want to be balanced! Generally Balanced options comprise 60-70% in growth assets and 40-30% in income assets.

The options that your fund may offer you are … in terms of increasing risk are

Cash – Invests 100% in bank deposits or other ‘capital guaranteed’ products.
Conservative – Around 30% in shares and property with the majority in fixed interest and cash.
Balanced – About 70% in shares or property, and the rest in fixed interest and cash.
Growth – At least 85% in shares or property.

If you are young … go for Growth, or High Growth … every time! Your super will be invested for 40-50 years and this is plenty of time to ride a few bumps that Growth assets such as shares and property can sometimes throw … Embrace risk and ride these bumps …. It is a good lesson to realise that the beautiful dance between risk and growth must be part of your investing life – Without risk, it is impossible for your investments to grow substantially.

Depending on your time frame, your tolerance to risk will vary. There are good reasons for someone approaching retirement to step back from a growth at all costs investment strategy. But, if you are just starting your working life, and want to grow your superannuation in a meaningful way … time is on your side … and risk is part of this process …

Australian Super have crunched the numbers and found that

YOUNG workers choosing “low risk” investments for their superannuation may be up to $170,000 worse off

The appealing sounding “low risk” options mostly deliver returns not much higher than inflation … And, we are not interested in just tracking inflation … we want growth!

If your superannuation amount is low and you want to give it a bit of a boost, and you earn less than $51,021 (2016/2017 year), the Australian government runs a co-contribution scheme that will reward you on a sliding scale – If you earn less than $36,021, the tax office will automatically kick in a maximum $500 for a $1000 after tax contribution to your super fund – This reward gradually tapers to zero as your income approaches $51,021. This is a pretty good return for your investment!

Grandparents and parents please note – if your wonderful offspring have a part-time job and a compulsory super fund – and you have a windfall that you would like to pass onto the next generations that cannot be frittered away on teenage pleasures – I am reminded of the fantastic George Best quote here.

I spent a lot of money on booze, birds and fast cars. The rest I just squandered.

Despite the wisdom of George Best, a gift of $1000 that would go directly to your loved one’s super fund would attract this govt co-contribution and be a great lesson in the benefits of compounding interest.

Superannuation … Engage! – Part 1

Most Australians, particularly young Australians, rarely show interest in their superannuation(retirement)fund. I can understand this when you are just starting your working life and your experience with super is just to see a slab of your pay earmarked for some obscure fund that you wont be able to access until you are almost fossilized at the age of 60.

However, it is time to engage … our super fees are too high in Australia … and a lot of the problem is the design of the system … and apathy. The Australian compulsory superannuation system is much envied – However, it could be improved – your default fund is decided by your employer and this, annoyingly, could change with each new job – it is time to take control!

According to the Super Sting report put out by The Grattan Institute, Australian’s pay $21 billion a year in super fees. Australians pay fees at almost 3 times the rate of other OECD countries. The report states

… a 30-year old Australian today will have his or her super balance reduced by almost $250,000 in fees (in today’s dollars) at retirement!

This is too much! Set aside an evening where you hunt down the latest super statement from your fund and do a bit of google research. I would throw in a glass of wine … but that’s just me!

Sure … there is a delay in getting your super … but it is your money, why give to the bloated financial industry!

Many super funds ask you to pay fees of up to two per cent per year to have your compulsory superannuation ‘managed’ However, with a tiny bit of effort, it is possible to restrict your super fees to around 1% (or less!) per year. This means a person with a fund balance of $50,000 could reduce their fees from around $1,000 per year to less than $500 – just by filling out a few forms .. the whole process is outlined on the ASIC Moneysmart site – I will borrow and paraphrase these steps …

Choose a fund – The Slack way is to let someone else do the legwork for you and go to the independent site SuperRatings – they list a top 10 funds (I have shown the top 5 – over a 5-year period below). Note that on this trawl, they are all Industry funds. Retail funds usually have lower returns as they have higher fees.

TOP 10 RETURNS AS AT 28/02/2017
Rank	Fund Investment Option	Return	Return Period
1	HOSTPLUS – Balanced	10.80%	5 year
2	Cbus – Growth (Cbus MySuper)	10.66%	5 year
3	UniSuper Accum (1) – Balanced	10.56%	5 year
4	AustralianSuper – Balanced	10.54%	5 year
5	CareSuper – Balanced	10.54%	5 year

Don’t get carried away with small differences in returns but, as well as previous returns, take a look at the other important factor, yearly fees – RateCity has sponsorship deal with some super providers, but their listing on performance comparison here shows typical yearly fees on $50k balances – If you can get fees $500 or below (<1%), you are doing OK.

Check your insurance cover – Income insurance is usually a good idea, and this is a separate component to your fees- life often can sometimes throw up something unexpected and a basic policy might help you out in times of trouble. For older folk … near retirement with equity in your house … this insurance is not so important.
Open a new account – Contact your proposed new fund and set up an account – no upfront transfer of money is required … this will come later. Ask them for all details to tell your employer – Choose well … and this will be your super fund for your working life.
When your new fund is established, tell your employer – Make sure they know where to pay your super and make sure you have your new account number. Your employer will have to enter these detail in the payroll software- Keep this fund for ALL of your jobs when you fill out your employee information forms!
Rollover super to your chosen fund – This is simple if you have only only one existing fund – your new fund will have a form that you can use to request a rollover from your existing fund. OR, if it is complicated and you have several funds going, you can combine these online through myGov,

There is more to say on this topic … stay tuned for part 2. For more information take a look at the ATO’s keeping track of your super page.

2017 March – End of Month Update

Slack Investor remains IN for US, UK, and Australian index shares.

The Slack Investor has been true to his ethos and not published any general interest posts for a month … this will happen from time to time … but I will commit to prompt monthly updates for those who follow the US, UK and Australian indexes and who may value the Slack input to their buy/sell decisions – these will be published in the first couple of days of each month.

I have been off to New Zealand. The great advantage of the Slack approach to investing is that I can be away from the markets – even out of internet range for up to a month at a time – the lack of required decisions on a daily, or weekly, basis suits my style.

New Zealand is a remarkable country to which Australia is the older, louder, uglier, more arrogant brother! I had a great time and the the Kiwis would often impress with their manners, integrity and general genuineness(?).

Day 3 Milford Track NZ – Thanks sister-in-law for the photo

We were mostly in the South Island and the scenery was jaw-droppingly beautiful. … I want to go back! Slack Investor and travelling companions are shown casting appropriately shadowy figures on Day 3 of the Milford Track – Nice photography skills from my sister-in law … Enough of the travelogue.

March 2017 has seen rises, in the UK and Australian markets and a refreshing pause with the US Index. It is also dividend season down under and Slack Investor always enjoys this time when each company (hopefully) shows their appreciation for supporting them with a little trickle into the bank accounts.

For more information on parameters such as progressive gains, look on the Slack investor ASX Index, US Index and UK Index pages for updated details – and a look at the charts. I have also updated my Portfolio page – this portfolio page will only be updated occasionally and is not presented as an investment guide – it just shows the type of companies that Slack investor is interested in – mostly growth companies with established dividend records. Next end of month update on the index charts will be early in May.