Superannuation Discussion + market volatility

[QF WP]

I was game enough to check this morning. I've lost ~AUD1,300 in one super fund or roughly ~1.25%. Not good but I suspect there'll be further adjustments.

Dow Jones up 2.3%, so made up half the drop from yesterday. Profit seekers were in there buying from the nervous, un- or ill-informed (mostly mums and dads). Automated trading platforms were both buyers and sellers. People fear losing money more than gaining it.

Fund balance adjusts every day. But few people view their balances every day. It's time in the market, not timing (if you are in for an appropriate time period). This volatility over acouple of days will be lost in the fullness of time. Check the DJ link and start going to longer periods.

True. A couple of key points for me and why I've never seriously considered shares.

Perception of value is right. Just because the stock market has a value doesn't mean that everyone can value their shares that way. If everyone wanted their money now the shares are not worth what you think they are worth.

An education is rarely wasted . Don't forget that yoru fund manager, unless they are an index manager, will not be buying the index. They are buying specific shares whose performance may bare no correlation to that of the index.

I did the numbers for a client in early January, who was worried about Trump, Dow Jones etc. His portfolio is significant but his asset allocation is 50% growth & 50% defensive. His International asset allocation was 19% of his portfolio and only 7.5% of his overall portfolio was invested in US stocks. I showed him the Top 10 stocks (from the 3 investment managers). All of a sudden, he was educated and realised that he was spending too much time worrying and not enough time understanding his investments. Complete turn-around in attitude as his perception changed.

 

[RooFlyer]

I was game enough to check this morning. I've lost ~AUD1,300 in one super fund or roughly ~1.25%. Not good but I suspect there'll be further adjustments.

But why would you sell? Been said here and in the Super thread time after time, you only get a loss if you sell. Of course there will be further adjustments -up and down, up and down <repeat>. Plenty of alternatives if you don't like risk - why not use those instead of these other 'rip-off' investments you keep moaning about? Gosh, could it be that you like good returns?

Secondly imagine a company listing 1,000,000 million shares at $10.00 each and all shares are purchased. The next day someone sells 1,000 shares for $20 and all of a sudden the company has doubled in value? Way too easy to manipulate and people have been doing for a long time.

Not true of course, but I'm sure that won't worry you; but if its a concern, why not invest in something safe/very low risk, and quit the hand-wringing and complaining?

 

[QF WP]

For those interested, a good article from Fidelity International about the 10 key messages for investors about volatility

https://www.fidelity.com.au/fidelit...volatility messages for investors - FINAL.pdf

 

[TheRealTMA]

I was game enough to check this morning. I've lost ~AUD1,300 in one super fund or roughly ~1.25%. Not good but I suspect there'll be further adjustments.

You haven’t lost anything since you haven’t cashed out. And, given your apparent views on investing IMHO Super is a very good low risk medium return investment for you. No? Horses would be better?

True. A couple of key points for me and why I've never seriously considered shares.

In theory our share portfolio ‘lost’ some $70+K yesterday, but gained a lot back today and will recover with time. Last night and this morning presented some interesting buy opportunities. As has been said elsewhere, a good balanced share portfolio gives excellent returns in time, even a simple index based investment is low risk and rewards with time. For example, as I’ve mentioned before, our modest investment in Sydney Airports from 2014 has returned a average 15% annual ROI over that time.

 

[JohnK]

But why would you sell? Been said here and in the Super thread time after time, you only get a loss if you sell. Of course there will be further adjustments -up and down, up and down <repeat>. Plenty of alternatives if you don't like risk - why not use those instead of these other 'rip-off' investments you keep moaning about? Gosh, could it be that you like good returns?

I'll be ready to start cashing in around 6 years time. It'd be nice to have some super to cash in. I, unlike you, am expecting we have not yet seen the true global financial crisis. 2008 was just a blip. I hope the next installment waits.

As for investments I don't have a lot. Can't afford to risk a lot. I will put in another $150,000 into super (guarantee + voluntary) in the next 6 years. Automatically lose 15% contribution tax and I'd be happy if the rest stayed intact. If I get 3%-4% returns that'd be great. Negative returns would be depressing so close to retirement.

See how the reels roll.

 

[JohnM]

I'll be ready to start cashing in around 6 years time. It'd be nice to have some super to cash in. I, unlike you, am expecting we have not yet seen the true global financial crisis. 2008 was just a blip. I hope the next installment waits.

As for investments I don't have a lot. Can't afford to risk a lot. I will put in another $150,000 into super (guarantee + voluntary) in the next 6 years. Automatically lose 15% contribution tax and I'd be happy if the rest stayed intact. If I get 3%-4% returns that'd be great. Negative returns would be depressing so close to retirement.

See how the reels roll.

Why don’t you just put a larger proportion into cash if you are so concerned about losing a lot and are happy to get a lower return?

 

[RooFlyer]

Why don’t you just put a larger proportion into cash if you are so concerned about losing a lot and are happy to get a lower return?

That's what I was getting at.

I'll be ready to start cashing in around 6 years time. It'd be nice to have some super to cash in. I, unlike you, am expecting we have not yet seen the true global financial crisis. 2008 was just a blip. I hope the next installment waits.

Financial crisis? Pah! Seen 'em come, seen 'em go (actually, didn't see 'em come but anyway ...). Markets recover and its the earnings that matter.

All this talk about risk/reward (well, my talk, anyway) got me a little teary ... fondly remembering the good old days of Poseidon and Tasminex ... and Bre-X! When I get home tomorrow I'll dig out my Bre-X share certificate and post a pic.

Who hasn't read The Official History of Blue Sky Mines? Penny dreadfuls with NL status ... now they used to be fun. No Liability, except at gunpoint, as Pierpont used to say.

And if penny dreadfuls don't give you enough entertainment, get into the unlisted miners. They'll get yer fizzers clicking, baby! Your eyes will be so far out on stalks you can give the back of 'em a polish. Launched and developed one myself, once, with a couple of mates. Burkina Faso featured. Didn't quite make it to listing day shall we say. But hell, it was fun!

 

[JohnK]

Why don’t you just put a larger proportion into cash if you are so concerned about losing a lot and are happy to get a lower return?

That's certainly one option. Biggest issue would be very low return and the ATO also wanting half my cake but also losing the tax benefit of moving some of it into super.

 

[TheRealTMA]

That's certainly one option. Biggest issue would be very low return and the ATO also wanting half my cake but also losing the tax benefit of moving some of it into super.

Good balanced investment in ‘quality’ shares with franked dividends is the way to defeat ATO. Or Super.

 

[JohnM]

That's certainly one option. Biggest issue would be very low return and the ATO also wanting half my cake but also losing the tax benefit of moving some of it into super.

I don’t mean taking out of super and putting it a bank account. What I mean is selecting your investment mix within super. You are not obligated to put all your super into one investment option (balanced, growth, foreign - whatever).

Just make your own mix - eg. 60% cash, 40% balanced if you’re nervy. It can be any combination you like. It’s your choice.

 

[JohnK]

I don’t mean taking out of super and putting it a bank account. What I mean is selecting your investment mix within super. You are not obligated to put all your super into one investment option (balanced, growth, foreign - whatever).

Just make your own mix - eg. 60% cash, 40% balanced if you’re nervy. It can be any combination you like. It’s your choice.

Aah. Gotcha. Tone down the investment options. I will have a look to see what they have as the default.

 

[Deleted member]

I don’t mean taking out of super and putting it a bank account. What I mean is selecting your investment mix within super. You are not obligated to put all your super into one investment option (balanced, growth, foreign - whatever).

Just make your own mix - eg. 60% cash, 40% balanced if you’re nervy. It can be any combination you like. It’s your choice.

There are way more options than that.

 

[JohnM]

There are way more options than that.

Of course. I was only trying to help JohnK see the point which seemed to be evading him.

 

[TheRealTMA]

Of course. I was only trying to help JohnK see the point which seemed to be evading him.

IMHO: That's an impossible task you are attempting I suggest. Why people ask for complex advice on health or wealth on AFF instead of consulting a professional in the field is beyond me. Travel, hotels and Airfares fares yes, but the rest? Go figure?

 

[JohnM]

IMHO: That's an impossible task you are attempting I suggest. Why people ask for complex advice on health or wealth on AFF instead of consulting a professional in the field is beyond me. Travel, hotels and Airfares fares yes, but the rest? Go figure?

That’s true, but for a financially very conservative person like JohnK seems to be (and a worrier with it), I thought to not understand that he could choose his own (more conservative) investment mix within his super fund was a lack of very basic knowledge that could save him some angst.

 

[QF WP]

I'll be ready to start cashing in around 6 years time. It'd be nice to have some super to cash in. I, unlike you, am expecting we have not yet seen the true global financial crisis. 2008 was just a blip. I hope the next installment waits.

As for investments I don't have a lot. Can't afford to risk a lot. I will put in another $150,000 into super (guarantee + voluntary) in the next 6 years. Automatically lose 15% contribution tax and I'd be happy if the rest stayed intact. If I get 3%-4% returns that'd be great. Negative returns would be depressing so close to retirement.

See how the reels roll.

But you don't stop investing at retirement, just the contributions dry up. You have to invest the funds for the term of your natural life or until you have withdrawn the total balance (whichever comes first).

 

[tgh]

You have to invest the funds for the term of your natural life
In reality few people do this ; they mostly abrogate the responsibility to someone else, which for many is probably a good thing….

..and keeps advisers in Grange ..

 

[TheRealTMA]

That’s true, but for a financially very conservative person like JohnK seems to be (and a worrier with it), I thought to not understand that he could choose his own (more conservative) investment mix within his super fund was a lack of very basic knowledge that could save him some angst.

Possibly. However without direct advice of the full financial position, a more conservative Super investment policy my actually be the opposite of what would best suit the OPs personal circumstances with a time span of at least another six years of basic Super investments.

 

[QF WP]

You have to invest the funds for the term of your natural life
In reality few people do this ; they mostly abrogate the responsibility to someone else, which for many is probably a good thing….

..and keeps advisers in Grange ..

I don't believe abrogate is the correct term (as it's not repealing or evading their responsibility). Everybody transfers some day to day responsibilities in areas of their lives to which they are not experts, or don't have the time, ability and inclination to become one - otherwise every doctor, dentist, accountant, et al wouldn't have a profession. Can you imagine our self diagnoses? Shudder at the thought.

I must have missed my stock of Grange, but I'll accept St Henri as a reasonable alternative

 

[Deleted member]

Of course. I was only trying to help JohnK see the point which seemed to be evading him.

I appreciate that