# Which super - Australian, international, balanced?



## gooner (4 November 2009)

I have been thinking about where my super is best invested. Options that my super fund have that I would consider and management fees are as follows:

International shares (all international shares) - 0.8% pa
Australian shares (all Australian shares) - 0.3% pa
Balanced (Usual - Aus & Int shares, property,cash, fixed interest) - 0.4% pa
Higher growth (As for balanced but less fixed interest/cash) - 0.5% pa

I have opted to put 100% in Australian shares. My rationale for this is as follows:

- another 13 years before I can access it, assuming pollies do not change rules on me
- the significantly lower management fee for Australian shares provides a competitive advantage to this choice
- As an Australian super fund, the fund gets the franking benefit from investing in Australian companies. This is not available for investments in international shares
- Overweight resources compared to other choices which looks good going forward

Main disadvantage of my choice that I see is the lack of diversification from industries that are under represented on the ASX, such as drug companies, manufacturers, aircraft manufacturers etc

Interested in people's views on the choices that they have been made as to the asset classes they invested their super in and why.


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## Sir Osisofliver (4 November 2009)

Gooner

My Super is Self Managed. I personally think that most super funds are a ^%$# joke. How many super funds were able to *make money* during the GFC? Surely these incredibly highly paid fund managers being so highly educated knew that the market was cyclical and that they would have to protect themselves against downside risks to their portfolio. Right?

There is a thread around here started by Julia which describes in detail her decision making process in deciding to go that road as well. I encourage you to read it.

Given that you are 13 years from retirement, perhaps you should look into the requirements for a SMSF yourself. It's your money - you should look after it.

Cheers

Sir O


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## gooner (4 November 2009)

Sir Osisofliver said:


> Gooner
> 
> My Super is Self Managed. I personally think that most super funds are a ^%$# joke. How many super funds were able to *make money* during the GFC? Surely these incredibly highly paid fund managers being so highly educated knew that the market was cyclical and that they would have to protect themselves against downside risks to their portfolio. Right?
> 
> ...




Thanks for the comment. Most superannuation funds have strict investment limits, so it would have been impossible for them to avoid the meltdown. If I invest in a 100% Australian Equities fund, I expect it to be in equities, not cash because a fund manager thinks the market is going to fall......

If I thought the market was going to fall, I could easily advise the manager to switch me to a cash option. For me, the only advantage of a SMSF is that I could more easily get exposure to particular sectors and companies. However, i do not want to do the admin and my super fund is good low cost alternative.

My question was more around the markets to invest in, rather than SMSF versus externally managed funds.


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## Krusty the Klown (4 November 2009)

Getting closer to retirement, you should be thinking about how comfortable you are in any asset class as well as return.

The more volatile the class, the less sleep you may get. If you are comfortable and knowledgable in Aussie shares it may be your option.

Also, just because you retire in 13 years, does not mean you have to cash out the whole balance then. Just take out what you need to live on each year and keep getting the compound returns that way you can survive a hit like last year.

As to me, I'm quite comfortable in Aussie shares as it is a smaller market than global markets. That makes it easier to follow and be familiar with. Also I have the fact that I am in tune with our economy and politics. That's my comfort factor.

It's hard to keep up with the economies of every country or situation that may affect an investment when you invest globally.


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## gooner (4 November 2009)

Krusty the Klown said:


> Getting closer to retirement, you should be thinking about how comfortable you are in any asset class as well as return.
> 
> The more volatile the class, the less sleep you may get. If you are comfortable and knowledgable in Aussie shares it may be your option.
> 
> ...




Krusty

Good points.

I intend to keep most of my money in shares even once I retire. I will cash out some shares going into retirement to make sure I have enough cash at all times to ride out any market dips and a few years of expenses. Given a potential 30 years or more of retirement, I think it is important to have plenty of growth assets. Also helps to leave something for the kids.........


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## So_Cynical (4 November 2009)

Slightly off topic but along with my new job came the usual new super, i originally had no intention of switching from my current super as i was more than happy with the low fees/costs and the 7 investment choices i got.

Then i read about the new scheme (colonial first state) and was stunned at the 60+ investment choices  all with varying fees/costs and i can have any combination etc...so as far as choice goes i imagine its hard to beat....for those that want a higher level of choice and thus more control over normal super.

Personal http://www.colonialfirststate.com.a...10&FundProductName=FirstChoice Personal Super


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## Julia (4 November 2009)

gooner said:


> Thanks for the comment. Most superannuation funds have strict investment limits, so it would have been impossible for them to avoid the meltdown. If I invest in a 100% Australian Equities fund, I expect it to be in equities, not cash because a fund manager thinks the market is going to fall......
> 
> If I thought the market was going to fall, I could easily advise the manager to switch me to a cash option. For me, the only advantage of a SMSF is that I could more easily get exposure to particular sectors and companies. However, i do not want to do the admin and my super fund is good low cost alternative.
> 
> My question was more around the markets to invest in, rather than SMSF versus externally managed funds.



Gooner, obviously I'm going to agree with Sir O's comments above.
I think most people exaggerate the administration involved with a SMSF.
I would spend a maximum of about an hour a month on this, if I have been actively selling and/or buying.  During the long period I withdrew from the market, I effectively had no administration at all, after placing the funds in term deposits and recording that change of strategy.

There is really no more work involved than if you are buying or selling shares as an individual.  "Super" is nothing more than a tax advantaged vehicle in which to hold assets.


You quote the management fees for the various funds you're considering.
My costs would be a fraction of the cheapest you quote.   And I use my own accountant and auditor.  If you were to go with E-super or similar, costs are even less.

With a SMSF you have complete control and can judge the market on a minute to minute basis if that's what you want.

I sometimes wonder if some people avoid having a SMSF because they don't really have the confidence to manage their own investments.   It's just not that hard.  There's a heap of information on the web as to company and macro-economic fundamentals, and plenty of charting software to supplement this.



Krusty the Klown said:


> Getting closer to retirement, you should be thinking about how comfortable you are in any asset class as well as return.
> 
> The more volatile the class, the less sleep you may get. If you are comfortable and knowledgable in Aussie shares it may be your option.
> 
> Also, just because you retire in 13 years, does not mean you have to cash out the whole balance then. Just take out what you need to live on each year and keep getting the compound returns that way you can survive a hit like last year.



It's important to be aware that on retirement you need to switch from accumulation phase of public or private SF to the pension phase, thus eliminating any tax.  If you only move some of the funds into an allocated pension, leaving the rest in accumulation, you will continue to pay tax at 15% on whatever is not placed into pension.



> As to me, I'm quite comfortable in Aussie shares as it is a smaller market than global markets. That makes it easier to follow and be familiar with. Also I have the fact that I am in tune with our economy and politics. That's my comfort factor.
> 
> It's hard to keep up with the economies of every country or situation that may affect an investment when you invest globally.



I feel the same.  By sticking with Australian investments, it's way easier to be on top of what you need to know.


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## Krusty the Klown (5 November 2009)

Julia said:


> I sometimes wonder if some people avoid having a SMSF because they don't really have the confidence to manage their own investments.   It's just not that hard.




That and for a lot of people super itself is a mystery that's just placed in the too hard/boring/don't understand/not relevant for another 30 years basket.


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## gooner (5 November 2009)

Had a look at esuper - $750 a year unlimited transactions is pretty good, although tied to ANZ transaction account and etrade. At 0.3% management fee, this is breakeven at a super balance of $250k. I did not realise you could get this cheap, so will consider.

Guess some tax advantages as well if you do not churn stocks as much as externally managed funds? i.e only pay tax on realised profits. And can delay taking until pension phase.


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## Wysiwyg (5 November 2009)

gooner said:


> Had a look at esuper - $750 a year unlimited transactions is pretty good, although tied to ANZ transaction account and etrade. At 0.3% management fee, this is breakeven at a super balance of $250k. I did not realise you could get this cheap, so will consider.
> 
> Guess some tax advantages as well if you do not churn stocks as much as externally managed funds? i.e only pay tax on realised profits. And can delay taking until pension phase.




If you pay the fee out of your personal funds then you may be entitled to a cheque from the guvmint for co-contribution. The threshold is as follows.


> Your maximum entitlement is $1,000. However, you must reduce this by 3.333 cents for every dollar your ‘total income’ is over $31,920 up to $61,920.


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## gooner (5 November 2009)

Sent off an application to esuperfund.com.au today when I realised I could have the one fund for myself and my wife, for a total annual fee of $599 plus the ATO levy of $150. So saving fees on my account and also my wife's account. Free set up. Nice

Good savings despite my wife being in an industry fund and me having a cheap corporate fund.

Thanks for all the comments everyone:thankyou:


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## mortgagechoice (9 March 2011)

A balanced mix would be good, perhaps more tilted towards Australian due to our economy being slightly better than globally at this moment.


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## tothemax6 (9 March 2011)

Sir Osisofliver said:


> My Super is Self Managed. I personally think that most super funds are a ^%$# joke. How many super funds were able to *make money* during the GFC? Surely these incredibly highly paid fund managers being so highly educated knew that the market was cyclical and that they would have to protect themselves against downside risks to their portfolio. Right?



Well the funds were going gang-busters prior to the GFC, returning around 20% before the crash. I guess they figured the winning streak would go forever. The only fund that to my knowledge did make a positive return over the GFC was Goldman Sachs JBWere. Indeed after the GFC their batting average was still at 10% .


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## burglar (9 March 2011)

Can I start an SMSF with as little as $69K?

Why did I believe, (from what I've encountered), that 200K is a reasonable minimum?
What would I risk/forgo if I found a way to start with less?


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## FxTrader (9 March 2011)

burglar said:


> Can I start an SMSF with as little as $69K?
> 
> Why did I believe, (from what I've encountered), that 200K is a reasonable minimum?
> What would I risk/forgo if I found a way to start with less?




Yes you can but, accountancy and audit fees will cost you about $2,000/yr.  So with a $200k balance these fees amount to 1%/yr., acceptable by comparison with industry or retail super.  Many industry and retail super funds allow a certain amount of investment choice now, perhaps this might be a more desirable option for you.


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## burglar (9 March 2011)

FxTrader said:


> Yes you can but, accountancy and audit fees will cost you about $2,000/yr.  So with a $200k balance these fees amount to 1%/yr., acceptable by comparison with industry or retail super.  Many industry and retail super funds allow a certain amount of investment choice now, perhaps this might be a more desirable option for you.




Hi FxTrader,

Thank you for the response.
I currently pay $830 on my managed fund, ...
I would do well to hang in!


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## Julia (9 March 2011)

burglar said:


> Hi FxTrader,
> 
> Thank you for the response.
> I currently pay $830 on my managed fund, ...
> I would do well to hang in!



Not necessarily at all.
Do you believe you could achieve a better return than you're currently getting from your managed fund?  This is what you should be focusing on.

I believe ESuperfund has very low fees:



> SMSF Fees
> SMSF Setup Fee : FREE
> SMSF Annual Fee : $699 p.a.
> Includes the SMSF Audit
> Learn More




That's less than you are currently paying for a managed fund and you would be able to take charge of your own outcomes rather than paying some anonymous fund manager his take even if he loses money on your behalf.

I haven't personally used Esuperfund but have known many people who are very happy with them.

At that price, and presuming you have reasonable confidence in your own capacity to make money, I don't see why you wouldn't have your own fund, even with a low amount of capital at the start.

The oft quoted 'advice' that one must have more than $200,000 to feasibly start up a SMSF is, I suspect, peddled by the financial advisers attached to the public super funds.  They simply do not want to see their customer base reduced by people opting instead for SMSF's.
So, a bit like politicians, they waffle on and on in the marketplace about the need for a given amount to 'make it worthwhile' whereas imo I don't believe such a claim is valid if you actually consider the options.

Think for yourself and choose the logical option.


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## robusta (9 March 2011)

Could not agree with you more Julia. My SMSF with Esuper started with a bit less than $100,000 and is almost double that now.

Great to be in control of my own destiny.


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## burglar (9 March 2011)

Julia said:


> ... Think for yourself and choose the logical option.




Thank you Julia.

I have had a lot to say, and I have said a lot. 
At times I thought no-one was listening.

Here you answer one of my most important questions.

It's a two part answer!
Can I save money on my position in Super? 
Yes!

Can I outperform my Fund Manager? 
Maybe yes, but honestly, I don't know.
My track record is blemished.

Do I want to try? You betcha!

I may act on your advice.
Either way, thanks for your response.
It is here for others to see and in itself, that is beaut.


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## burglar (10 March 2011)

robusta said:


> Could not agree with you more Julia. My SMSF with Esuper started with a bit less than $100,000 and is almost double that now.
> 
> Great to be in control of my own destiny.




Hi robusta,

May I ask about your time frame?


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## Intrinsic Value (10 March 2011)

Julia said:


> Not necessarily at all.
> Do you believe you could achieve a better return than you're currently getting from your managed fund?  This is what you should be focusing on.
> 
> I believe ESuperfund has very low fees:
> ...




Yes that 200k figure is a joke really. If you are prepared to take control of your own investments as little as 50k is enough to set up a SMSF as you will recoup any fees by better returns very quickly and you have the added satisfaction that you are not feeding a bunch of parasites who are reaping obscene amounts in fees and charges out of the managed funds.

My case is pertinent....when i looked at how much i had actually contributed to Australian Super and then l looked at my balance I had 30k less than my actual contributions. I was in the balanced default fund. 

Basically I had contributed 230k and only had a balance of 200k. 

Contrast that with 200k that I invested over a shorter time period in the stock market using value investing techniques where my balance stands around 500k and you can quite clearly see the benefits of creating and managing you own SMSF.


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## Greg (10 March 2011)

Basically I had contributed 230k and only had a balance of 200k. 

Contrast that with 200k that I invested over a shorter time period in the stock market using value investing techniques where my balance stands around 500k and you can quite clearly see the benefits of creating and managing you own SMSF.[/QUOTE]

Maybe I've taken a fork in the road here by responding to your post and not Julia's but your experience just rang so true to me. I had a super balance of around $240k a couple of years ago and when I consolidated it a few weeks ago, my balance was just over $200k - not impressed, but nor am I equipped or knowledgeable enough to manage my own super, so I will ride the wave and manage with the results.

My second point is probably the most pressing; I'm very impressed with your achievements in the "Value investing" techniques and wondered (as a complete newbie) if you could point me towards some reading matter, research materials or a post on this forum that will allow me to better understand how you got such great results? Is that a really dumb question? I hope not.
Thanks
Greg


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## burglar (10 March 2011)

Intrinsic Value said:


> ...  as little as 50k is enough to set up a SMSF as you will recoup any fees by better returns very quickly ...




Baby steps! 
I have some trepidation as it seems complex.
I just have to remember the advice I give to others. 
Baby steps!

First step, asked here.
I thank you all, for your responses!

Second step,
I read some threads.
Not all in one go ... I stopped for lunch, half way through!!:

Third step,
I have emailed my FP. 
He is losing his revenue stream from the managed fund, should I go ahead.
His response may not be favourable.


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## So_Cynical (10 March 2011)

burglar said:


> Can I start an SMSF with as little as $69K?
> 
> Why did I believe, (from what I've encountered), that 200K is a reasonable minimum?
> What would I risk/forgo if I found a way to start with less?




Im in a similar boat to you Burglar and after uming and ahing about it over the last 14 months ive finally settled on Australian super, because with them i at least get to directly invest half my super money into ASX200 stocks, at a good price while still paying non trading fees of less than $140 a year.

I reckon this is the best compromise for people who reckon they can beat the fund managers but have less than 100K in super...i plan on starting a thread to follow my " beat the fund manager" super adventure when its all good to go.


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## burglar (11 March 2011)

So_Cynical said:


> ... i plan on starting a thread to follow my " beat the fund manager" super adventure when its all good to go.




I look forward to that, and I hope you smash him.


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## Knobby22 (11 March 2011)

burglar said:


> I look forward to that, and I hope you smash him.




Yes, let us know how you go!


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