# Superannuation direct investing outside of SMSF



## prawn_86 (1 January 2013)

Hi All,

There seem to be a few superannuation providers now allowing you to directly invest your super, which for those of us who are young with small super balances it makes sense to use over a SMSF.

I was wondering if members had any opinion as to what service is currently better? I know both ING and AustSuper both offer these products and i think ANZ offers something simlar also but i dont know that you can buy specific stocks with them.

Thoughts?


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## Bill M (1 January 2013)

I am thinking alone the same lines as I don't have a SMSF either. I like the ING living super product. With the ING one you seem to have a lot of choice. I like what it says here:

---

    No messy paperwork, establishment fees or compliance hassles
    Real time share trading with S&P/ASX200 Shares, Exchange Traded Funds (ETFs) and Listed Investment Companies (LICs)
    Extensive share market research

http://www.ingdirect.com.au/super_and_retirement/living_super.htm

---

I think the fee for using this facility is $180 flat p/a plus brokerage. The only thing is I am not sure hybrids, floating rate notes and convertible preference shares fit into ASX200 shares. They may be excluded.

It seems to give more flexibility than Aust. Super but I think so_cynical would be better writing about that as he is about the only person I know of that is with them.

Anyone else have an opinion?


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## So_Cynical (1 January 2013)

Bill M said:


> I think the fee for using this facility is $180 flat p/a plus brokerage. The only thing is I am not sure hybrids, floating rate notes and convertible preference shares fit into ASX200 shares. They may be excluded.
> 
> It seems to give more flexibility than Aust. Super but I think so_cynical would be better writing about that as he is about the only person I know of that is with them.




Ok so i found a list of approved security's for ING super..its a nice list including pretty much all the ETF's and all the good LIC's even little old CTN a small cap, small cap fund...ill do a comparison.

---

AustSuper


 Can invest *80%* of total account balance
 20% limit in any one stock
 *ASX 300* stocks and all iShares ETF's
 *$180* in annual fees + brokerage
 http://www.australiansuper.com/memberdirect

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ING Super


 Can invest *50%* of total account balance
 20% limit in any one stock
 ASX* 200* and looks like all the ETF's and Most of the LIC's
 *$180* in annual fees + brokerage
 http://www.ingdirect.com.au/pdf/Shares_EFTs_and_LICs.pdf

The (ING) list below is impressive, but the 50% limit is not..better choice but less money to control.
~


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## WilkensOne (1 January 2013)

Hostplus are also going to be releasing their own product along the lines of of Ing and AustSuper, said to be coming out January.

I have to say that AustSuper sounds like the better option because of the 80% investment option, I have been looking at moving my super over to them for a little while plus $15 brokerage isn't bad!


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## skc (1 January 2013)

So_Cynical said:


> Ok so i found a list of approved security's for ING super..its a nice list including pretty much all the ETF's and all the good LIC's even little old CTN a small cap, small cap fund...ill do a comparison.
> 
> ---
> 
> ...




So_C,

With Australiansuper, do you know if you pay the usual management fee for the portion of funds under memberdirect?

E.g. Your superbalance is $100k and the usual ASF fee is 1.2% ($1200 per year). You decide to use $80k for direct investments. Does it mean you only pay 1.2% on the remaining $20k?

Thanks


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## Julia (1 January 2013)

skc said:


> E.g. Your superbalance is $100k and the usual ASF fee is 1.2% ($1200 per year).
> Thanks



If you're paying a fee of $1200 on just $100K, you'd be better off having your own SMSF.
Perhaps I'm misunderstanding the annual fee.  Would be interested in clarification.


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## skc (1 January 2013)

Julia said:


> If you're paying a fee of $1200 on just $100K, you'd be better off having your own SMSF.
> Perhaps I'm misunderstanding the annual fee.  Would be interested in clarification.




Julie, I made up that 1.2% for illustration purpose only. 

The real number is 0.6% I think plus some non-size related admin fee ($1.5/wk). So with $100k balance it's around $680.

http://www.australiansuper.com/superannuation/what-we-offer/fees-and-costs.aspx


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## So_Cynical (2 January 2013)

skc said:


> So_C,
> 
> With Australiansuper, do you know if you pay the usual management fee for the portion of funds under memberdirect?
> 
> ...




The $180 is a flat fee ($15 per month - Portfolio administration fee) when you choose to use the members direct (Direct shares) option.


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## skc (2 January 2013)

So_Cynical said:


> The $180 is a flat fee ($15 per month - Portfolio administration fee) when you choose to use the members direct (Direct shares) option.




I know the $180 is a flat annual fee. But is that on top of the 0.6% annual fee of your super balance?


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## So_Cynical (2 January 2013)

skc said:


> I know the $180 is a flat annual fee. But is that on top of the 0.6% annual fee of your super balance?




Yes on top of = extra

So using the direct shares option adds $180 to the total fees..even if you only do 1 trade a year.

Looking at my statement my *total* fees last year were around $260 with brokerage and ASX fees included (12 orders or so) Life and TD insurance was $210 (not a believer in life etc insurance)

My statement shows my members direct fees at only $90 so not quite sure what's going on with that as i have a brokerage charge from July 2011 :dunno:


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## skc (2 January 2013)

So_Cynical said:


> Yes on top of = extra
> 
> So using the direct shares option adds $180 to the total fees..even if you only do 1 trade a year.
> 
> ...




OK thanks. 

It appears that the 0.6% investment management fees apply only to those pre-mixed investment options (like "balanced" or "International fixed interest" etc.


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## prawn_86 (2 January 2013)

Thanks everyone, i'm still to decide which way i will go


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## Julia (2 January 2013)

I don't like the fee basis of % of capital and can't really see how they can justify it.  I suppose the assumption is the more capital you have the more transactions you will make.
At 0.6% if you had just $500K invested that's $3000 before any brokerage.  That's more than most accountants would charge for annual tax return and audit etc on a SMSF.

ESuperfund offer free set up and annual tax return and audit for just $699.


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## prawn_86 (2 January 2013)

Julia said:


> I don't like the fee basis of % of capital and can't really see how they can justify it.  I suppose the assumption is the more capital you have the more transactions you will make.
> At 0.6% if you had just $500K invested that's $3000 before any brokerage.  That's more than most accountants would charge for annual tax return and audit etc on a SMSF.
> 
> ESuperfund offer free set up and annual tax return and audit for just $699.




I have 30k in super so $700 is over 2% plus the time etc needed. If i go with ING i will buy 3 stocks which will come to $240 and then probably leave the rest in either term deposits or their balanced fund which has no charge. So it comes to less than 1% on my capital


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## Julia (2 January 2013)

prawn_86 said:


> I have 30k in super so $700 is over 2% plus the time etc needed. If i go with ING i will buy 3 stocks which will come to $240 and then probably leave the rest in either term deposits or their balanced fund which has no charge. So it comes to less than 1% on my capital



Sure.  Makes sense when super balance is low.  I was just pointing that it doesn't make sense if the balance is larger.


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## sydboy007 (4 January 2013)

I was with Aust Super for the member direct product.  After 6 months I found it of limited value.

It's Ok if you want to invest in ETFs or top 300 companies.  The TDs on offer were mid raange, cash rate quite low.  Trades were expensive, moving money between the member direct account and you standard super account was done once a week on Monday and you needed to have the transfer in place by Sunday night.

So much happier to have set up my own SMSF via esuperfund.  I now have a good array of ILB, shares, etfs, listed interest securities and cash earning 5% for the next 6 months.

I would hazard a guess that if you have a super balance of 100K then a cheap SMSF like what esuperfund offer you can work out saving you money compared to a lot of retail and some industry super funds.  Once you balance gets up to 150K or more then I would say you are well ahead as you have a fixed cost base rather than the leach mentality of the super industry based on a % of assets under management.  Biggest Government sponsored rort I have ever seen.

If you have an interest in your super, and are willing to take on the responsibilities of being a trustee then I say go for it via a SMSF.  Your super will be you biggest asset outside the family home so it's best you start growing it as early as you can.


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## Trembling Hand (4 January 2013)

sydboy007 said:


> If you have an interest in your super, and are willing to take on the responsibilities of being a trustee then I say go for it via a SMSF.  Your super will be you biggest asset outside the family home so it's best you start growing it as early as you can.




Thats the biggest mistake with super. Why grow something and make it your second or even first biggest investment with something so friggin restricted?

A cent hasn't gone into my super for 5 years now, from anywhere. And I cannot see that changing.


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## prawn_86 (4 January 2013)

Trembling Hand said:


> Thats the biggest mistake with super. Why grow something and make it your second or even first biggest investment with something so friggin restricted?
> 
> A cent hasn't gone into my super for 5 years now, from anywhere. And I cannot see that changing.




While i agree for some of us it cant be helped. I do not contribute personally but with employer contributions it is getting to a point where i need to take control of it. 

Long term plan for me is to start a SMSF in 4 or 5 years and then just buy some land/property so we have something physical to fall back on based on a worst case scenario when we retire. That way the government and fund managers will be less likely to meddle with it when under a SMSF


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## DocK (4 January 2013)

Definately makes sense for us as we used the super accumulated during our employed years to purchase the factory from which we run our business, via a SMSF.  The rental income our company pays to our SMSF, along with the compulsory 9% on our salaries, is then invested.  Whilst I agree that the regulatory risks of superannuation are unknown (largely at the whim of Gummint) and this is problematic, for me the benefits outweigh the risks.  Just keeping my fingers crossed that we're not all forced to treat our SMSF capital as a lifetime annuity or similar down the track - I have plans for at least a small lump sum


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## GG999 (13 January 2013)

skc said:


> So_C,
> 
> With Australiansuper, do you know if you pay the usual management fee for the portion of funds under memberdirect?
> 
> ...




I'm not totally clear on what the answer was, is it possible to make it clear please?

was it      Yes, or No?


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## IB12 (13 January 2013)

I actually came across this thread because my Industry Superfund (AGEST) got acquired (merged with) by AustralianSuper recently. 
So they are moving all my funds across to AustralianSuper. 
I like Industry Super funds because they are low cost, I can get my returns with them  through self directed investor options, and it's piece of mind and less time consuming. I don't have to manage all the paper work and time consuming compliance duties. My time is very important to me ... and I don't want to waste it with compliance, accounting and auditing. 

Was thinking about setting up a SMSF with eSuperfund, and trade/invest with InteractiveBrokers (IB).

I already trade with IB, and am happy there. 

However came across the fact that AustralianSuper have a direct investing option at a very competitive price/cost base compared to most DIY SMSF providers. If I can get my returns with the way it is structured at AustralianSuper then I"ll stay with them.

One thing I like about AustralianSuper is that they give you access to UBS research. 

Anyone can give me any insights on which way forward?

AustralianSuper pros:


Save time
Cheap/low cost
Access to UBS research (spill over benefits for my IB trading)
Safe, stable industry super fund that you can rely on

Australian Super cons:

High brokerage costs at $15/trade
Still limited in total flexibility of investment choice i.e. ASX300 shares, international ETFs, and DIY pre-mixed investment options (this can be a good thing if you're a know nothing investor/trader)
Costs might be more expensive as your account balance gets larger than 100K i.e. $180 p.a. for member direct option + ~0.6% p.a. of account balance for standard superannuation account administration costs + $15/trade. Works out to be about ~$780 p.a. before any brokerage costs. 

eSuperFund Pros:

Cheap/low cost- flat $700 fee, regardless of size of account or number of transactions made. (this excludes brokerage costs. If you're with IB it's about $6/trade asx equities, or $1/trade for US based equities, $5-$15 for futures contracts etc + $20/per month for data from IB. If you're with Comsec option then it's probably more expensive than AusSuper since Com$ec charge  $19/trade). 
Can use Interactive Brokers to trade

eSuperFund Cons:

Your share/future holdings are held on trust by IB, not under your chess account HIN (effectively you are an unsecured creditor)
Maybe some issues regarding long term viability/stability/safety compared to an established Industry Super fund like AustralianSuper (i.e. you don't want an armageddon event to happen to your SMSF like MF Global)
More time consuming - matters if time is money and is important to you. 

On my analysis, AustSuperFund's direct investing option works out to be cheaper if you don't trade much (i.e. less than 20 trades per year) and have a small account balance (less than 100-200K).
This is especially true if you end up using Com$ec with eSuperFund. 

Thanks.


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## IB12 (13 January 2013)

I forgot to add, for all SMSFs there is an ATO Levy. Which I think costs around $200/year.


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## So_Cynical (13 January 2013)

GG999 said:


> I'm not totally clear on what the answer was, is it possible to make it clear please?
> 
> was it      Yes, or No?




No...you only pay 0.6% p.a. of the account balance for standard superannuation investment options (the funds you have in the normal part of the super)


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## GG999 (14 January 2013)

So_Cynical said:


> No...you only pay 0.6% p.a. of the account balance for standard superannuation investment options (the funds you have in the normal part of the super)




Many thanks for making it clear, So_Cynical  (had me a bit concerned when reading previous discussion, but I wasn't sure how to read things)

I presume that's why the Funds offering this type of thing will always insist that you keep a certain % of your funds in the investment options so that overall they can get the fees to pay for everything. 

Unless they are hiding fees somehow, they couldn't be making much from the Member Direct

They are planning to bring in Direct Shares for people in pension phase - hopefully one can transfer shares directly from Accumulation to pension account (although I couldn't get that answer from them from an email enquiry - I was wondering whether one might have to sell the shares and pay the Capital Gains tax on the profits and then rebuy for a pension account)


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## GG999 (14 January 2013)

IB12 said:


> I forgot to add, for all SMSFs there is an ATO Levy. Which I think costs around $200/year.





I had a pension account with AGEST and a smaller, Accumulation account also with AGEST to which I was salary sacrificing.
Because of the upcoming 'merger', and because like you I was wondering about SMSF or Member Direct type of thing, I decided to transfer the Accumulation account to AustralianSuper.

Firstly, the money took 2 or 3 weeks longer to appear in the AusSuper account than it was supposed to - not a major problem compared to what some other people have had to go through I've found out since. I'm pretty sure it was a problem at AusSuper's end, and not any fault of AGEST.

In general I've found the people manning the phones at AGEST very helpful. Unfortunately can't say the same about AusSuper although to be fair I've only talked to them a few times thus far.

Maybe the merger has been very carefully planned and all will go through smoothly.

I'm very happy with the Direct shares in AusSuper. And if time is a very big factor for you then it could be a good solution. The website is a bit clunky but in the end you can get all of the information that you need.And maybe I'll find my way about more quickly the more I use it.  I use Commsec to check on current share price, info about companies because that's what I'm more accustomed to. I always use limit bids and when entered on the Member Direct webpage I see my bid appear on Commsec within a minute - much faster than I've seen someone else claim that it happens.

Because I'm looking at smaller and smaller companies I'm finding the ASX300 to be a bit of a limit - or at least if you're getting interested in a particular company, check that you are able to buy it through the Member Direct before getting too committed to it. My alternative is to wait for dividends and then buy the smaller company through my Commsec account

(odd, but I couldn't reply to your previous, longer post)


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## So_Cynical (14 January 2013)

GG999 said:


> Unless they are hiding fees somehow, they couldn't be making much from the Member Direct




Brokerage...there is no way they are actually paying $15 for a small trade..not with 42+ billion under management, they must pocket a couple of bucks on every trade.



GG999 said:


> They are planning to bring in Direct Shares for people in pension phase - hopefully one can transfer shares directly from Accumulation to pension account (although I couldn't get that answer from them from an email enquiry - I was wondering whether one might have to sell the shares and pay the Capital Gains tax on the profits and then rebuy for a pension account)




I did see something about this, hope they do it cos it would really suit me.



GG999 said:


> Firstly, the money took 2 or 3 weeks longer to appear in the AusSuper account than it was supposed to - not a major problem compared to what some other people have had to go through I've found out since. I'm pretty sure it was a problem at AusSuper's end, and not any fault of AGEST.




I found AustSuper to be very slow at doing pretty much everything.



GG999 said:


> In general I've found the people manning the phones at AGEST very helpful. Unfortunately can't say the same about AusSuper although to be fair I've only talked to them a few times thus far.




AustSuper like to boast about how good they are at customer service, however i have found that although its easy to talk to someone on the phone, the customer service people haven't got a clue..i get the feeling that the phone centre is there to appease customers who also don't have a clue and ring up asking the same 5 or 6 questions.



GG999 said:


> Because I'm looking at smaller and smaller companies I'm finding the ASX300 to be a bit of a limit - or at least if you're getting interested in a particular company, check that you are able to buy it through the Member Direct before getting too committed to it.




A couple of things to be aware of

Just because a stock code appears in the drop down and then box, doesn't mean you can always buy it...i think that some stocks that have dropped out of the ASX300 still appear in the stock list so holders can sell them...but the rest of us cant buy them.

You can only place a limit order within (i think) 8% of the last buy price (limit buy order under the last sale price) and 5% of the last sell price (limit sell order above the last sale) something like that.

EG: when placing a sell order over night, and the closing price was $1.00 the system wont accept an order above $1.05 you get an error message (to far away from the current price) annoying but ok when you get used to it.


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## GG999 (15 January 2013)

So_Cynical said:


> Brokerage...there is no way they are actually paying $15 for a small trade..not with 42+ billion under management, they must pocket a couple of bucks on every trade.




If that's what others mean by 'hidden fees' then I think I'm ok with it. I might like the brokerage to be lower, but at least I know what that cost is.





So_Cynical said:


> A couple of things to be aware of
> 
> Just because a stock code appears in the drop down and then box, doesn't mean you can always buy it...i think that some stocks that have dropped out of the ASX300 still appear in the stock list so holders can sell them...but the rest of us cant buy them.
> 
> ...




I hadn't realized any of that, so much appreciated

I just started to check the ASX300 and what shares are available in Members Direct.

Firstly, if I do a 'Quick Stock Quote'
e.g for WOW - at top of page it says ASX300 Yes
and for REA - ASX300 No

On Commsec, WOW is shown as being 3.2% of the ASX300 and 2.9% of the All Ords
Whereas REA is only shown as 0.18% of the All Ords. 

REA market cap 2455 million. Number of shares outstanding, and the share price has only really gone up and up
Actually, so I can't see why REA was part of the ASX300 and isn't anymore 

Anyway I'm glad you pointed this out, and now I know that I can do the 'Quick Stock Quote' to see if it is available to be bought in the Member Direct.
Actually a listing of current available shares on the AusSuper site would be the simplest thing - I didn't find that in the past, I'll go searching for it again now

How many stocks are there in the ASX300, by the way?


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## sydboy007 (15 January 2013)

The AustSuper memberdirect is good if all you want is to invest in the top 300 and ishares ETFs

You can't buy any of the hybrids or interest style securities, and no access to the smaller end of the market which rules out a lof ot he better yielding stocks now.

I found it too restrictive for my liking so moved to a SMSF, but if your needs are simple then it can be a cheap option for you.

I think the trades are move expensive than $15 though.  Was pretty sure that my 10K trades were costing around the $30 mark.

The thing I like most about a SMSF is I know have complete visibility of where I generate my returns from - income / capital growth.  Maybe I'm too much of a control freak, but it's giving me a lot more confidence about how my investment strategy is going


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## Julia (15 January 2013)

GG999 said:


> How many stocks are there in the ASX300, by the way?



300.


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## GG999 (15 January 2013)

Well, I've been looking, but I haven't found a source that simply gives you a list of the S&P ASX300 index.
I actually registered at the S & P site to get the info directly from them, but the listing I was able to get looks like a year or so out of date.

I found a pdf on the ASX site - current as of September 2012 - but that doesn't include changes made in Sept 2012 such as inclusion of BRG, MAD, MLD etc and exclusion of CLR, GOR, KRL etc.

I think the best thing I've found so far is using Commsec and going 'Research Tools' -- 'Company Search' -- 'Company Statistics' -- select Field 'Indices' -- option   'equal to' and choose S&P ASX300

I wonder if all of this data is directly from S & P (and thus only changed twice per year) or whether it is modified by Morningstar whenever a change is needed - for example, SCP is in the ASX300 - but the S&P wouldn't have included it back in September.

If you know of anyone keeping an up-to-date list hopefully you'll let me know.
Meanwhile I'll assume that the list obtained from Commsec is ok and I'll check whether it is just those stocks that can be bought through AusSuper e.g are the new entrants such as SEA, SKE already available through the Member Direct site


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## Trembling Hand (16 January 2013)

Huh?

http://www.asx.com.au/documents/resources/sp_asx_300_v2.pdf


Or,

View attachment SPAUSTA300AUDFF--P-AU----Constituents.xls


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## GG999 (16 January 2013)

Trembling Hand said:


> Huh?
> 
> http://www.asx.com.au/documents/resources/sp_asx_300_v2.pdf
> 
> ...




Thanks Trembling Hand

Just saying that the most up-to-date list I've found so far is by going through the Commsec site (Morningstar I presume is the source)

So for example, the listing I have from Commsec doesn't include BTA, IGR, IDL whereas they are listed in that pdf and in that spreadsheet. 

For people interested in the AustralianSuper Member Direct - they appear to be using the most up to date list as far as I can see. If you look for a recent S & P ASX300 addition then it shows up with a BUY and SELL button.

If you look for a stock that has just dropped out of that index then it still appears, but with no BUY button. There's no SELL button either which is the only odd thing


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## GG999 (16 January 2013)

GG999 said:


> Thanks Trembling Hand
> 
> Just saying that the most up-to-date list I've found so far is by going through the Commsec site (Morningstar I presume is the source)
> 
> ...




But the versions you found are more up to date than what I had found originally - I'll have to look around the ASX site to see how that happened - well spotted.


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## So_Cynical (16 January 2013)

Not 100% sure how accurate this ASX300 list is.

http://www.asx300.com/


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## systematic (16 January 2013)

Julia said:


> 300.




296, last I looked


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## systematic (16 January 2013)

GG999 said:


> Well, I've been looking, but I haven't found a source that simply gives you a list of the S&P ASX300 index.
> I actually registered at the S & P site to get the info directly from them, but the listing I was able to get looks like a year or so out of date...
> 
> ...If you know of anyone keeping an up-to-date list hopefully you'll let me know.





Hi GG999,

Go to the new site

Click on the constituents tab on the right hand side

Click on "full constituents list" and you will get a csv, last updated 31st December 2013

Have attached for convenience

Hope this helps...

View attachment ASX300 31.12.2012.xlsx


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## GG999 (17 January 2013)

So_Cynical said:


> Not 100% sure how accurate this ASX300 list is.
> 
> http://www.asx300.com/




No, like many other lists it is out of date. This would all be easier if every listing had a 'last modified' date at the top! Thanks anyway.





systematic said:


> Hi GG999,
> 
> Go to the new site
> 
> ...




Yes, this is probably the best source.
I had the old site bookmarked and had gone there, so I guess that's why the listing that I downloaded was not up-to-date.

And going to the new site - I thought that they were only showing the top 10 in the index - I wouldn't have noticed how to get the complete listing without your directions so many thanks.
So that's all sorted now

On the number of stocks comprising the indices - I notice in the methodology that they say that the ASX 200 comprises 'the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization'

 Whereas for the ASX 300 it is 'up to 300 of the largest securities'
I guess that with the smaller companies that there are so many mergers, take-overs etc that they don't want to be committed to always having exactly 300 in the index at all times.

The actual number was 292 in an older version that I had downloaded, and yes it is 296 in this most recent one.


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## systematic (17 January 2013)

...Cool.  Like you've already done (but for others) - the index construction pdf's are worth a read (for anyone that is interested in indices).


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## Mr J (18 January 2013)

Trembling Hand said:


> Thats the biggest mistake with super. Why grow something and make it your second or even first biggest investment with something so friggin restricted?
> 
> A cent hasn't gone into my super for 5 years now, from anywhere. And I cannot see that changing.




Agree, but do you mean nothing additional has gone in, or nothing at all? I would love to know how to put an extra 9% in my pocket to use as I see fit!


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## Trembling Hand (20 January 2013)

Mr J said:


> nothing at all?




You only pay 9% if you are a wage earner. Simple don't work for someone.


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## McLovin (21 January 2013)

Trembling Hand said:
			
		

> Thats the biggest mistake with super. Why grow something and make it your second or even first biggest investment with something so friggin restricted?
> 
> A cent hasn't gone into my super for 5 years now, from anywhere. And I cannot see that changing.




Agree. For anyone under 50, there's also the possibility that by the time you are able to tap your super the taxes may have significantly changed to the point that the reason you originally put so much in super is no longer relevant. I can definitely see means testing SMSF coming in over the next decade.


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## Julia (21 January 2013)

An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.

It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
It's for those who don't.


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## McLovin (21 January 2013)

Julia said:


> An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
> Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.




Good point, Julia. And I agree with both your sentences.


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## Trembling Hand (21 January 2013)

Julia said:


> It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
> It's for those who don't.




Funny thing is a few months ago a good friend who has just turned 40 told me that he was putting $250 a week into his super because it was their only way to save for retirement!! I slapped him in the head.

Can you imagine giving up $250 a week to not be able to control it for 20 years!!! 

I told them they could actually put that into a broking account and buy a managed fund or ETF and then use it for whatever, whenever and however they wanted. They had never thought of it!!!


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## McLovin (21 January 2013)

Trembling Hand said:


> Funny thing is a few months ago a good friend who has just turned 40 told me that he was putting $250 a week into his super because it was their only way to save for retirement!! I slapped him in the head.
> 
> Can you imagine giving up $250 a week to not be able to control it for 20 years!!!
> 
> I told them they could actually put that into a broking account and buy a managed fund or ETF and then use it for whatever, whenever and however they wanted. They had never thought of it!!!




Some people have no financial discipline. I have a mate who just had a kid and wants to set up some sort of education savings thing for him. He wants it to be in an account that he (my friend) can't touch because he's worried if he sees that money there he'll be tempted to spend it. He's not exactly poor and would probably be pulling in $150k/year but he rarely has money left over at the end of the month..


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## skc (21 January 2013)

McLovin said:


> Agree. For anyone under 50, there's also the possibility that by the time you are able to tap your super the taxes may have significantly changed to the point that the reason you originally put so much in super is no longer relevant. I can definitely see means testing SMSF coming in over the next decade.




With super taxed at 15% while highest marginal tax rate at 49.5%... it's a pretty big incentive even for those under 50. Over 20 years, the same performance say 10% p.a. will yield 511% after tax within super but only 268% under personal name (assuming highest tax rate). Over 30 years, the numbers become 1156% vs 438%.

I often consider this difference to be the "control premium" one must pay. They have to tax super a fair bit more than they currently do to make this equation unattractive.

So I find myself putting a small amount in super as a hedge.


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## McLovin (21 January 2013)

skc said:


> With super taxed at 15% while highest marginal tax rate at 49.5%... it's a pretty big incentive even for those under 50. Over 20 years, the same performance say 10% p.a. will yield 511% after tax within super but only 268% under personal name (assuming highest tax rate). Over 30 years, the numbers become 1156% vs 438%.
> 
> I often consider this difference to be the "control premium" one must pay. They have to tax super a fair bit more than they currently do to make this equation unattractive.
> 
> So I find myself putting a small amount in super as a hedge.




I have a small amount in super too. The problem is that tax policy is not set in stone it adjust to maintain the revenue base. Go back thirty years and there was no FBT, GST, CGT and lots of companies getting lost at the bottom of the Harbour. With super I am making a deal with the government that I agree to put my money into a regulated account and in return receive a concessionary tax rate. This scenario works well while the majority are in accumulation phase and still paying income tax, but what happens when all those baby boomers hit retirement and go into pension phase super or the government pension? Someone still needs to pay the bills and it would not surprise me in the least when/if the government announced that SMSF's with assets over $x will have their income taxed at ordinary rates. It also wouldn't surprise me if they put drawdown restrictions in place.

That's what I don't like about it, there are too many variables. And aside from that, I'm not that interested in living like a pauper until I'm 60 and then a King.


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## skc (21 January 2013)

McLovin said:


> And aside from that, I'm not that interested in living like a pauper until I'm 60 and then a King.




That is so true and it is the reason I don't put a lot in Super. I have every intention to be well off enough without ever worrying about what's in my super account.

I find it unbelieable that some professionals with 40yr working live would find themselves with no assets aside from the family home and super upon retirement... yet that seems to be the base case for many scenarios proffered by financial planners...


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## Julia (21 January 2013)

McLovin said:


> . He's not exactly poor and would probably be pulling in $150k/year but he rarely has money left over at the end of the month..



This happens so often.  Why???  Ex-husband of a relative has been earning around $200K for many years.
He doesn't even own his own place, and is struggling to fund his basic living expenses while he takes a couple of years off to do his PhD.
Meanwhile, his ex-wife has almost paid off the mortgage on $1.5M home in Sydney, along with completing a couple of degrees, working, and raising two profoundly deaf boys.

Just beats me how some people can be so intelligent about some things, yet be financially hopeless.


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## Mr J (21 January 2013)

Trembling Hand said:


> You only pay 9% if you are a wage earner. Simple don't work for someone.




If I didn't work for anyone at all, I would still have to pay myself super to avoid tax thresholds above 32.5%.

I thought you did work for "someone"? I would love to be able to avoid super. I can look after my own affairs thanks!


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## Trembling Hand (21 January 2013)

Mr J said:


> If I didn't work for anyone at all, I would still have to pay myself super to avoid tax thresholds above 32.5%.




Huh?

What are you talking about. My income comes from my company dividends. NO Superannuation guarantee on them. 

http://calculators.ato.gov.au/SGCalculatorWeb/help/Amount.aspx?ms=Businesses



> I thought you did work for "someone"?




No my company does work for many.


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## Trembling Hand (21 January 2013)

Also last time I checked if you are a "Sole-trader" your income is not covered by Superannuation guarantee.


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## sydboy007 (21 January 2013)

Julia said:


> An additional risk is the requirement that much of the Super will be required to be taken as an annuity.
> Makes considerable sense but would irritate many of those retiring who may want to pay off loans, travel etc.
> 
> It's probably reasonable to remember, TH and McLovin, that compulsory Super wasn't designed for people like you who will have the capacity and sense to provide for their own retirement.
> It's for those who don't.




The problem is leaving access to super with few restrictions tends to mean those with the least ability to reduce their burden on the tax payer can fritter it away faster than they should.

I would argue that until your not entitle to any for of Govt pension you shouldn't really be able to tap int your super in a way that increases the pension you get.  How we achieve that goal I'm not sure.  I just don't think it's fair to allow someone to take a lump sum from their super to pay off private debt, which then allows them access to a pension, or increase the pension they're entitled to.

Maybe a simple way is to only allow a 10% lump sum, and the rest needs to be taken as some form of annuity??


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## DocK (22 January 2013)

sydboy007 said:


> The problem is leaving access to super with few restrictions tends to mean those with the least ability to reduce their burden on the tax payer can fritter it away faster than they should.
> 
> I would argue that until your not entitle to any for of Govt pension you shouldn't really be able to tap int your super in a way that increases the pension you get.  How we achieve that goal I'm not sure.  I just don't think it's fair to allow someone to take a lump sum from their super to pay off private debt, which then allows them access to a pension, or increase the pension they're entitled to.
> 
> Maybe a simple way is to only allow a 10% lump sum, and the rest needs to be taken as some form of annuity??




Maybe it would be fairer to restrict access to the % of capital contributed by employers, but not get in the way of retirees accessing lump sums from additional contributions they've made voluntarily.  If person X has only a small super balance due to only the compulsory contributions having been made, and person Y has a large super balance as they've put in extra themselves over many years - why should person Y be unable to take a lump sum to repay any remaining private debt, buy a caravan, take a holiday etc if it's essentially their own money they want to get their grubby little hands on!


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## sydboy007 (22 January 2013)

DocK said:


> Maybe it would be fairer to restrict access to the % of capital contributed by employers, but not get in the way of retirees accessing lump sums from additional contributions they've made voluntarily.  If person X has only a small super balance due to only the compulsory contributions having been made, and person Y has a large super balance as they've put in extra themselves over many years - why should person Y be unable to take a lump sum to repay any remaining private debt, buy a caravan, take a holiday etc if it's essentially their own money they want to get their grubby little hands on!




Could be one way of doing it.  

I often wish I could put a bit extra into my super and keep it in cash or fixed interest and then take back the $ value I had deposited at a later time.  The earnings on the money would be kept till retirement.

The way things stand, it's really best to leave super as a minimum till your 50s and then start hitting the 25K limit each year with some undeducted contributions to top things up.


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## Mr J (22 January 2013)

Trembling Hand said:


> Huh?
> 
> What are you talking about. My income comes from my company dividends. NO Superannuation guarantee on them.
> 
> ...




Brainfart, I had forgotten about dividends.

I hope that is typical for those in your line of work


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## Trembling Hand (22 January 2013)

Mr J said:


> Brainfart, I had forgotten about dividends.
> 
> I hope that is typical for those in your line of work




It is if you own a business and decide not to draw a wage or Director fees. Or if you are a sole trader. You just pay yourself and thats it. No Super.


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## So_Cynical (22 January 2013)

I just posted this chart of my superfund trades in the SAI thread, i figured it worthy of some discussion in this thread, as a demonstration of what's possible with an AustSuper or ING account that allows you to trade within your (non SMSF) super account. 
~





~
By trading in and out of the same stock, taking partial profits, its possible to build a position while recycling capital and locking in trade profits...my super fund (trading part) has more closed trade profits than open trade profits.

--------------------



Trembling Hand said:


> Can you imagine giving up $250 a week to not be able to control it for 20 years!!!




As above...its not like i have no control at all, i can trade with restrictions to at least build my balance, what the Govt does in the future is of course another matter...but i/we do have some control.


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## Mr J (23 January 2013)

Trembling Hand said:


> It is if you own a business and decide not to draw a wage or Director fees. Or if you are a sole trader. You just pay yourself and thats it. No Super.




I think a typical accountant would suggest I'm subject to PSI. You give me hope


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