# Why is my super tanking?  I thought Oz was doing ok?



## resbequoi (4 September 2010)

Hello all, 
I was wondering if anyone could provide any insight:

I had 82K in super, put in approx 8K over the year, got taxed 1.5K and LOST 7.5K investing 100% in Australian shares with AustralianSuper.  Less fees etc so I now have approx 80K.

LOST 7.5K!!  I thought that our market was stable?  I thought our economy was doing ok - treading water, but ok?  I don't get it.  This is the same return as when the GFC occurred two years ago.

Can anyone explain it to me, please? 

cheers,
Res


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## So_Cynical (4 September 2010)

What was the % return for the FY of that investment choice?


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## builder2818 (4 September 2010)

Do you know where your money is being invested within the fund? 

I've had my super moved into fixed interest since late last year. Sure I missed a few months of gains but glad I wasn't invested since our markets have headed south. There's too much uncertainty at the moment in the markets.


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## startrader (4 September 2010)

I switched my super to cash at the end of 2008.  Am getting about 4% per annum and am very happy with that.  No way would I have my super in shares - it's way too risky.  Don't believe the media hype about how great we're doing - they don't know what they're talking about.


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## Julia (4 September 2010)

startrader said:


> I switched my super to cash at the end of 2008.  Am getting about 4% per annum and am very happy with that.  No way would I have my super in shares - it's way too risky.  Don't believe the media hype about how great we're doing - they don't know what they're talking about.



You can do much better than 4% in online accounts.
Do you mean you've switched to the cash option within a public superfund and that's the best they will do?


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## So_Cynical (4 September 2010)

Julia said:


> You can do much better than 4% in online accounts.
> Do you mean you've switched to the cash option within a public superfund and that's the best they will do?




The cash option of many public super funds is surprisingly low compared to online accounts and most TD's.


TWUsuper cash plus 6.39%
AUSTsuper cash 4.22%
AUSTsuper capital guarantee 3.11%
HOSTplus cash 3.920%%

http://www.twusuper.com.au/files/97/976dfac2-7482-470d-92f9-39f894d6285d.pdf

http://www.australiansuper.com/investments_performance.aspx

http://www.hostplus.com.au/investme...monthly-net-fund-earning-rates-for-comparison


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## robots (4 September 2010)

hello,

all above support the great benefit of being outside the super system where you are able to enjoy the returns of residential property also

which for many with $ building up is a non-existent asset class they are able to invest in

since 2003 my fund CBus (core sector) has returned about 5% pa, super is about a regular savings plan which will be good for some

thankyou
robots


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## Smurf1976 (4 September 2010)

Julia said:


> You can do much better than 4% in online accounts.
> Do you mean you've switched to the cash option within a public superfund and that's the best they will do?



Same here. I switched to cash but the return is less than I could get from one of the major banks in an online account, and less than I could gain by simply reducing the mortgage.


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## startrader (4 September 2010)

Julia said:


> You can do much better than 4% in online accounts.
> Do you mean you've switched to the cash option within a public superfund and that's the best they will do?




I switched to the cash option in my super fund and, as So-Cynical says, the return for the cash option of super funds is low compared to online accounts.  Even though the return is only about 4% my balance has grown nicely in the last two years.  Before I switched to cash my money was in an Australian Shares option, which was returning over 20% per annum.  I just checked the return on that option for the last 3 years and it is -4.06%.  I'm very happy I don't still have my money there!!!


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## freddy2 (4 September 2010)

Because super is one big gravy train for the financial services industry and you are getting fleeced like millions of Australians.


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## So_Cynical (4 September 2010)

startrader said:


> I switched to the cash option in my super fund and, as So-Cynical says, the return for the cash option of super funds is low compared to online accounts.  Even though the return is only about 4% my balance has grown nicely in the last two years.  Before I switched to cash my money was in an Australian Shares option, which was returning over 20% per annum.  I just checked the return on that option for the last 3 years and it is -4.06%.  I'm very happy I don't still have my money there!!!




Its all a matter of timing...i switched to Aust shares in March 09 and my account balance was up 28% in just 6 months....its come back a bit since then but still outperforming any cash option by 3 or 4 times.


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## startrader (4 September 2010)

resbequoi said:


> Hello all,
> I was wondering if anyone could provide any insight:
> 
> I had 82K in super, put in approx 8K over the year, got taxed 1.5K and LOST 7.5K investing 100% in Australian shares with AustralianSuper.  Less fees etc so I now have approx 80K.
> ...




Hi Res,

In answer to your question as to why you have lost money, the reason is that the stock markets are now extremely volatile with extreme swings up and down which would stop investors out of their positions. It therefore is almost impossible for funds to make money in this environment, and much easier to lose it.  It's going to remain this way for the next few years so if you keep your money in shares you can look forward to losing more of it.  

Even if we as a country are doing well this situation is going to stay the same as we are going to be affected by what is going on overseas.


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## resbequoi (4 September 2010)

Hi all,
thanks Startrader for that reply.
I will admit something that people will think is stupid - yes I believed the hype and wanted to hope for the best.  I also thought that by staying xposed to oz shares and shovelling more money in, the funds would be buying more shares cheaper which would reward me when things supposedly became better.  
It was a punt that went wrong.

Living and learning
Res


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## Julia (4 September 2010)

startrader said:


> Hi Res,
> 
> In answer to your question as to why you have lost money, the reason is that the stock markets are now extremely volatile with extreme swings up and down which would stop investors out of their positions. It therefore is almost impossible for funds to make money in this environment, and much easier to lose it.  It's going to remain this way for the next few years so if you keep your money in shares you can look forward to losing more of it.



This should not be the case if the so called professional fund managers you're using are engaging in genuine hands-on management where they can short falling stocks etc.
Instead, most of them seem to take a completely passive approach and might as well just put all members' funds into a fund that simply mirrors the index.

Why anyone would want to pay fees for this is beyond me.  Even if your Super balance is not high, using an online administrator like Esuperfund keeps tax return and audit fees low, so surely you'd be better off having a SMSF.


> Even if we as a country are doing well this situation is going to stay the same as we are going to be affected by what is going on overseas.



That's largely true and all the more reason to not allow super fund managers to line their own pockets whether they make you money or not.



resbequoi said:


> Hi all,
> thanks Startrader for that reply.
> I will admit something that people will think is stupid - yes I believed the hype and wanted to hope for the best.  I also thought that by staying xposed to oz shares and shovelling more money in, the funds would be buying more shares cheaper which would reward me when things supposedly became better.
> It was a punt that went wrong.
> ...




Res, there are lot of even reasonably experienced investors who do what you've done, i.e. average down.  If your money is invested in quality companies that have simply been affected by general market sentiment, they'll almost certainly recover in time.

That said, averaging down is something I'd never, ever do, in my wildest nightmares.

If I were you, I'd be asking your fund managers why your cash return is so much less than can be obtained on the open market.  You'd have to imagine that they are actually investing it at the most favourable rate, and pocketing the difference instead of passing this on to you.  Hope you don't let them get away with this, without calling them to account.


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## UBIQUITOUS (4 September 2010)

Julia said:


> Res, there are lot of even reasonably experienced investors who do what you've done, i.e. average down.  If your money is invested in quality companies that have simply been affected by general market sentiment, they'll almost certainly recover in time.
> 
> That said, averaging down is something I'd never, ever do, in my wildest nightmares.




Off topic Julia, but I'd beg to differ on that. There are circumstances where averaging down can make sense. However, this is the exception and not the rule, and should only be done if it is the ONLY way that you can pick up stock in a company where you are ABSOLUTELY SURE that price does not reflect value AND will recover without you being able to pick up the same amount of stock on the way up. 

Having said that, you have to keep enough gunpowder dry that you can take full advantage and not left without funds should the price go even further south. Certainly not a strategy for anybody who is not in a position to keep a VERY close eye on their investment.


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## Julia (4 September 2010)

UBIQUITOUS said:


> Off topic Julia, but I'd beg to differ on that.



Beg to differ on what exactly, Ubi?   I said that if the investments are in quality companies they will almost certainly come back in time.  Are you disagreeing with that?

Or simply because I said I would never average down?

There are successful investors in this forum who do average down and good luck to them.
I'm simply saying it's not something I am comfortable doing.



> There are circumstances where averaging down can make sense. However, this is the exception and not the rule, and should only be done if it is the ONLY way that you can pick up stock in a company where you are ABSOLUTELY SURE that price does not reflect value AND will recover without you being able to pick up the same amount of stock on the way up.



Here we part ways:  I'm only interested in market sentiment/price action, not "value", having seen so many 'undervalued' stocks languish for extended periods.


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## gooner (4 September 2010)

Julia said:


> This should not be the case if the so called professional fund managers you're using are engaging in genuine hands-on management where they can short falling stocks etc.
> Instead, most of them seem to take a completely passive approach and might as well just put all members' funds into a fund that simply mirrors the index.




Julia,

Most super options are set up to be cash, equities, balanced etc, so most fund managers do not have the choice of shorting or going to cash. If they go outside the fund mandate they will be sued to buggery..........


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## So_Cynical (5 September 2010)

gooner said:


> Julia,
> 
> Most super options are set up to be cash, equities, balanced etc, so most fund managers do not have the choice of shorting or going to cash. If they go outside the fund mandate they will be sued to buggery..........




I've always though it was strange that the big industry funds simply passed the money to someone else, they should be investing directly, buying shares and property etc...why do industry super funds just buy into other funds? surely there mandate should be to deliver returns by any means appropriate.

For any fund to be returning under 5% or there cash option is just crazy.


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## tech/a (5 September 2010)

With $80K you should be setting up your own SMSF.
Then YOU have control.
With the ability to borrow within for Property robots has a very good point.

Take control of YOUR finances.


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## startrader (5 September 2010)

resbequoi said:


> Hi all,
> thanks Startrader for that reply.
> I will admit something that people will think is stupid - yes I believed the hype and wanted to hope for the best.  I also thought that by staying xposed to oz shares and shovelling more money in, the funds would be buying more shares cheaper which would reward me when things supposedly became better.
> It was a punt that went wrong.
> ...




Hi Res,

I don't think that what you did was stupid at all.  I think there would be a lot of other people doing the same thing.

I could of course be wrong about shares being risky in the near future but for my own situation I would rather err on the side of caution and protect my capital.  When I am confident that this financial crisis has really passed and the problems which caused it have been addressed I might put my money back into shares but, for now, I would rather be safe than sorry.

Good luck with whatever you decide to do with your super!


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## GG999 (23 September 2010)

resbequoi said:


> Hello all,
> I was wondering if anyone could provide any insight:
> 
> I had 82K in super, put in approx 8K over the year, got taxed 1.5K and LOST 7.5K investing 100% in Australian shares with AustralianSuper.  Less fees etc so I now have approx 80K.
> ...





Presumably the tax would have been greater if you hadn't put it into super?


I checked the performance of 'Australian Shares' in Agest over the year 4 Sept 2009- 4 Sept 2010 (date of your post) and it is + 6.4%
That must mostly reflect dividends and franking advantages because the Aus market hasn't changed much over that period.

I then compared Agest to AustralianSuper and there doesn't seem to be a big difference in terms of fees etc

AustralianSuper seems to have a platinum 7 year award which is odd because it says in there that it started in 2006. (Obviously there's something i don't understand)

So your big loss is inexplicable - have you tried phoning and asking them whether there's been a big mistake?


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## resbequoi (23 September 2010)

GG999 said:


> Presumably the tax would have been greater if you hadn't put it into super?
> 
> 
> I checked the performance of 'Australian Shares' in Agest over the year 4 Sept 2009- 4 Sept 2010 (date of your post) and it is + 6.4%
> ...




Yes, I definitely saved some tax by putting money into super.  

I feel a bit sheepish now because since my panic attack, my super basically recovered what it lost (not that great of a result actually but that's the risk of shares) - which was the point of startraders post of extremes.  Sheepish but relieved and happy  

I had a closer look at doing my own super, even the e-super option people have talked about and I realised I just don't have the time to set it up and manage it right now.  
Also, Australiansuper does have an ASX200 option so I can trade whatever shares I want.  Also the DIY asset allocations I've decided to so some investment switching and mixing (keeping in mind the fees).  

Silly me having to wait for a big shock before I pulled my finger out though.

Thanks all very much for your posts answering the thread.

cheers,
Res


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## doctorj (23 September 2010)

tech/a said:


> With $80K you should be setting up your own SMSF.
> Then YOU have control.



Just curious on this. Not sure what's so wrong with getting specialists to take care of things that someone might not necessarily have expertise in.  Saying you should do your own SMSF if you have $80k you should run your own SMSF is a little like saying if you have anything larger than a moderately sized house you should be doing your own gas plumbing and electrical work.  Sure, some can, but often its worth acknowledging that its best to engaging others to do risky things.


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## sinner (23 September 2010)

Why does the super "cash" rate yield less than online savings account?

"Cash" option in the Super is not same as cash in a bank account.

The first option is usually invested in 30-90 day bills/notes/swaps on the money markets, extremely liquid, with the rate closely tracking the RBA cash rate +/- a few bps volatility and a few more I'm sure the fund manager takes.

Cash in an online bank account is generally returning yield based on longer term home loans, credit card and term deposits plenty of which are still locked in at pre-GFC rates. This is where the premium is.

These days, there is no such thing as "cash", not even under your mattress. It's all just debt. So pick your debt wisely, chasing yield or conversely hoarding cash doesn't always pay. Anyone with a brain can see the Treasury guarantee is worthless in a crunch. Keep your savings/super liquid, diversified, safe and accessible. Not interested in returns, just a retention in purchasing power. You want the dollar you save to be worth a dollar when spent.

I believe Nassim Taleb recommends 90 day bills in the domestic currency as the liquid savings vehicle. You will never be on the wrong side of a move in rates for more than a quarter and you pretty much get at whatever the central bank is loaning out.


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## gooner (23 September 2010)

doctorj said:


> Just curious on this. Not sure what's so wrong with getting specialists to take care of things that someone might not necessarily have expertise in.  Saying you should do your own SMSF if you have $80k you should run your own SMSF is a little like saying if you have anything larger than a moderately sized house you should be doing your own gas plumbing and electrical work.  Sure, some can, but often its worth acknowledging that its best to engaging others to do risky things.




Given most actively managed funds return below the index, there is a strong argument that a good investment strategy is to buy an indexed fund or just put your money in the top 25 shares, which gives you a result very close to an index fund given the weighting of the 25 companies. If you do this via a SMSF and do not churn you are likely to get a better after tax return particularly given the lower fees in a SMSF


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## doctorj (23 September 2010)

gooner said:


> Given most actively managed funds return below the index



I know this is popular belief here, but has anyone done the numbers on actively managed vs passive index over a full cycle? The fact that actively managed funds will always retain some cash is sufficient to explain the difference, but also, it should mean they outperform in a downturn.


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## poverty (23 September 2010)

doctorj said:


> I know this is popular belief here, but has anyone done the numbers on actively managed vs passive index over a full cycle? The fact that actively managed funds will always retain some cash is sufficient to explain the difference, but also, it should mean they outperform in a downturn.




Bear in mind the active fund will be paying some tosser of an active manager plus all hangers-on a ridiculous salary when the fund is going bad or a ridiculous salary plus ridiculous bonuses when the fund is going good.


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## nukz (23 September 2010)

Superfund's are so bad, they are run by a bunch of bean-counters who know nothing. Most superfund's I've seen would have had better returns if they just put cash into a bank account. 

Superfund's AFAIK cannot use shorting mechanism's either which created abit of lost opportunity, especially in this climate.


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