How to run your own successful Super Fund

[ROE]

Panaman : I think you dead set and driven to run your own SMSF, give it a shot it may ticks for you but be prepare if things don't work out.

I don't have background in finance or accounting or anything to do with financial market.

some of the best and richest investor in the world has no background in finance...they comes from all walks of life
laws, engineering, uni drop out....

Good luck.

 

[burglar]

Panaman : I think you dead set and driven to run your own SMSF, give it a shot ...

I agree with ROE!

A winner is a loser who doesn't give up.
There is one HUGE thing this forum has done for me.
It has fuelled my persistence.

 

[Julia]

when I said I was considering running my own superfund he was almost smirking and said similar to you that I should leave these things to the professionals,

(Sigh.)
I didn't say any such thing. I wouldn't be entrusting my super to any fund manager, but then I'd had twenty years of investing experience across property and shares before I started my SMSF.

You have, as ROE says, obviously already made up your mind that you're going to start a SMSF so I'll just say good luck.
(Note to self: remember the resolve to stay out of these threads.)

 

[craft]

Panaman, there are a few super funds that allow you to make your own investments and they do all the compliance and reporting. To me they are like having a SMSF but without you having to do the compliance.

I am with ING Living Super. I can invest in cash and term deposits without fees. I can also buy shares, ETF's and funds like Vanguard. I can do all the allocation myself without a great deal of interference from ING. For me to buy and sell my own ETF's or shares they will charge me only $180 per year (plus per parcel brokerage). It is not bad, no $700 per year fees. There are some restrictions but from what it sounds like it might suit you.

Have a look here: http://www.ingdirect.com.au/super_and_retirement/living_super.htm

I have had a SMSF for nearly a decade and require it to invest in smaller companies and it is deeply ensconced in my estate plan so I have never looked at these platforms within super funds as they weren't around before I bailed to a SMSF. But I did dig into the link Bill M supplied to get some answers to my earlier tax ponderings and am pretty impressed.

The big one for me is that they do seem to keep your deferred CGT obligations separated and you can benefit from that when turning 60.

If you transfer from a Super account to a TTR or Pension account, or vice versa, the following tax treatment will apply: Listed securities may be transferred in specie and once sold will be subsequently taxed under the capital gains treatment of your new account

Still some small timing issues with tax cash flows and potential collective issues with things like franking holding periods etc. but in my view these platforms are a huge leap in both accounting fairness, cost and investment control over traditional collective superannuation and probably for many people a better alternative than a SMSF.


Easier and unless I'm missing some fees its cheaper then a SMSF. So unless their is some specific asset class you want to invest in not covered by the platforms or some estate planning reason etc - don't dismiss this option. From what Panaman has put so far it looks like it would suit his needs.

 

[fiftyeight]

Some good info in this thread.

I have wanted more control over my super but having minimal capital its not worth me having a SMSF. The ING type setup looks like it might suit my needs. Will definitely be looking into it more during the week.

Cheers all

 

[Bill M]

Easier and unless I'm missing some fees its cheaper then a SMSF. So unless their is some specific asset class you want to invest in not covered by the platforms or some estate planning reason etc - don't dismiss this option. From what Panaman has put so far it looks like it would suit his needs.

You are right craft. This ING Living Super fund only got started last year. I waited quite a while before I got into it. My main reason for getting into it was that I could lock in market rate term deposits for 2 years without fees. Other retail funds will be very very lucky to make 2.5% on their cash components in the 2013 - 2014 tax year. I invested in a 2 year term deposit and got 4.7% P/A interest. Currently I think that TD is 4.2%. I would rather get 4.7% than 2.5% any day.

You mentioned what you can not invest in. I invest in hybrids, convertible notes and floating rate notes. You can not buy these direct on the ING platform because they don't make the top 200 ASX listed stocks. I can not invest in smaller companies either but I don't do that anyway so it doesn't affect me. I mostly invest in bigger companies with a history of paying dividends and all those fall into the top 200.

Somebody also mentioned, rules and compliance. I do absolutely nothing with ING. They are the ones who do all that. At the end of the financial year I just got a statement how much personal contribution I made and what to do if I want to claim a tax deduction. The rest is all online and clearly shows your income and Government tax deductions for the year. All you need to be aware of is how much you are putting in. Be very aware of your caps on how much you have put in both taxed and untaxed as there are limits. Apart from that, nothing else to do. I still don't know how I will deal with my hybrids, convertible notes and floating rate notes but for now they remain out of the super system.

Here is an article about ING Living Super, they seem to be getting plenty of customers. http://www.smh.com.au/money/super-and-funds/lifes-looking-good-for-ings-living-super-20130326-2grlc.html

 

[Panaman]

Panaman: my suggestion would be for you to get some professional advice.

Julia

I have re-read what I wrote, (that all came out wrong), you did not say I should get professionals to run my Super, you said I should seek advice so please accept my apology.

As I have said before all iam trying to do is find out what products people who run their own super use and try and get as much insight as to what it takes to run your own fund successfully, many people say they run their own funds but very few seem to be forthcoming (thanks to those that have been though) as to what type of products they use, iam not asking for specific advise iam just trying to get a handle on what products are out there that people are actually using, Real estate for example, unless you have a large balance in your fund, buying physical land and buildings is out of the question so how do people get exposure to this sector.

 

[McLovin]

Julia

I have re-read what I wrote, (that all came out wrong), you did not say I should get professionals to run my Super, you said I should seek advice so please accept my apology.

As I have said before all iam trying to do is find out what products people who run their own super use and try and get as much insight as to what it takes to run your own fund successfully, many people say they run their own funds but very few seem to be forthcoming (thanks to those that have been though) as to what type of products they use, iam not asking for specific advise iam just trying to get a handle on what products are out there that people are actually using, Real estate for example, unless you have a large balance in your fund, buying physical land and buildings is out of the question so how do people get exposure to this sector.

I use an accountant. A good accountant is worth their weight in gold. I guess it really does depend how much you're going to have in the fund though. If it's a smaller amount then maybe one of the cheaper options is worth it (I have no experience with them).

 

[Julia]

Julia

I have re-read what I wrote, (that all came out wrong), you did not say I should get professionals to run my Super, you said I should seek advice so please accept my apology.

It's fine, Panaman. Easy enough to misinterpret something.

As I have said before all iam trying to do is find out what products people who run their own super use and try and get as much insight as to what it takes to run your own fund successfully, many people say they run their own funds but very few seem to be forthcoming

OK, fwiw I use my own accountant, someone I've been with for several years. Yes, I pay more than I would if I used Esuper et al, depends on the volume of work in any given year, usually around $1500 including audit, which seems entirely reasonable to me, given I have someone I trust to sound things off on throughout the year, who I can depend on to keep me up to date with anything I need to know, and to attend to all the stuff like investment strategy, minutes etc.

Re investing in property: can you do this via Esuperfund or ING et al?

Bill, you mentioned being happy with the TD rate via ING. Presumably you have to access what is available through them, eg you can't negotiate your own rate with a bank?

 

[Bill M]

Bill, you mentioned being happy with the TD rate via ING. Presumably you have to access what is available through them, eg you can't negotiate your own rate with a bank?

Yes that is correct Julia, I have to take what ING offers itself, I can not for example open a TD with say UBANK and put that in my account. ING however, are competitive with rates I must say.

Panaman, I have not started buying shares, LIC's or ETF's within my account as yet. However what I have done in the past (outside super) was purchase an ETF in the property sector. One such ETF is SLF, fact sheet here: http://www.spdr.com.au/etf/fund/fund_detail_SLF.html

Click on broker basket to see what they hold. There are many ETF's out there covering all sectors, look around and see what suits you.

It is as simple as logging into your account and putting in a buy order, paying your brokerage and it is in your account. The ETF itself does charge a management fee but at least this way the ticket only gets clipped once. For example if you are in a Retail Fund, your retail manager might charge a fee for management of the property component. Then you look deeper and they hire other managers like State Street Global Advisers to supply the ETF, and that ETF also has it's management fees and in the case of SLF that is .40%. Your ticket gets clipped twice this way. At least if you buy your own ETF direct within your SMSF or flexible Super Fund you only pay the fee once, hope that helps.

 

[Panaman]

It is as simple as logging into your account and putting in a buy order, paying your brokerage and it is in your account. The ETF itself does charge a management fee but at least this way the ticket only gets clipped once. For example if you are in a Retail Fund, your retail manager might charge a fee for management of the property component. Then you look deeper and they hire other managers like State Street Global Advisers to supply the ETF, and that ETF also has it's management fees and in the case of SLF that is .40%. Your ticket gets clipped twice this way. At least if you buy your own ETF direct within your SMSF or flexible Super Fund you only pay the fee once, hope that helps.

Thanks Bill

What you have said rings pretty true and why I believe anyone with a bit of basic knowledge can run there own fund, I would be a fool if I thought I could trade shares with limited experience but with the use of the index etf,s and listed funds that the big superfund’s also use you can cut there slice of pie out of the fees you pay, also they tend to favour there own, AMP for example will use AMP funds, BT, Westpac group funds etc, I want to almost cherry pick the best manager in each, then along with the safety of term deposits build a long term portfolio

State street I thought looked good across the board, there ASX high dividend fund looks the pick of the bunch though, to be honest once ive done a bit more research and got the varies ideas on the table its then I need to implement this and stick to the plan.

So far for Shares, I like the Vanguard ASX 300 fund, State Streets High dividend fund, Argo Investments listed Fund, the BKI listed fund.

For Property the State Street property Trust etf, then a listed company called The Australian Social Infrastructure Fund that is mentioned by another poster on another topic called Sydboy007.

For Fixed income, Term deposits but also another stock mentioned by this Sydboy007 I checked out called the Australian enhanced income fund, then an ETF from Russell investments called the Corporate bond fund.

Then I have to get the mix right, maybe 50% shares, 25% fixed income, 15% Term deposits and 10% property and, then reinvest all dividends and add to investments or add new ones as the cash balance from contributions allows, that is a decent size to buy, maybe when it reaches $10000.

 

[Julia]

I use an accountant. A good accountant is worth their weight in gold.

Yes, my accountant has saved me way more than I've ever paid him in fees.

 

[Panaman]

Vanguard have now launched an emerging markets etf, so another option for those who run there own super, all we need now is some International fixed interest and property etf,s to be launched on the ASX and just about anyone could run there own superfund using the same portfolio mix as the big industry and retail funds.

I’m almost there with setting up with esuperfund, then I can transfer my existing fund and get started

 

[Panaman]

Racing !, well not quite but im up and running, did my research and have now taken the plunge.

The balance of my Super has been removed from the clutches of AMP and invested in the following to hold for the 12 years before i hope to retire, all dividends and distributions reinvested.


30% in SYI, State Street select high dividend ETF
15% in SSO, State Street Small Ordinary’s ETF
15% in CAM, Listed Shares and Hybrid investment fund
10% in BKI, Listed Share investment fund
7.5% in AYF, Listed Hybrid Fund
5% in BOND, State Street Bond ETF
5% in RCB, Russell Corporate Bond ETF
5% in SLF, State Street Property ETF

The remaining 7.5% has been invested in the Vanguard Lifestratagy Balanced Fund and I have also set up a direct debit for my employer contributions and salary sacrifice to be paid from my V2 account into the Vanguard fund every fortnight, as I will be salary sacrificing the full amount its going to be $25,000 a year into this Index tracking fund that is 50% Growth, 50% Income, so over the 12 years $300,000 will be paid in (hopefully).

 

[robz7777]

The full amount its going to be $25,000 a year, so over the 12 years $300,000 will be paid in (hopefully).

Cap should increase to $30k next year.. Or $35k for those over 50... But as always likely to change!

 

[sydboy007]

I'm glad a few people have been interested in AYF. It's a cheap and easy way to get diversity into hybrids. have my dad in it too. He's quite happy with the 60% better yield than a TD.

AKY is another good alternative, though now it's sort of in the wind down phase as there's only 2 of the 5 years remaining for the fund, but I'm hoping there will be an AMCBF6 released sometime between now and Dec 2015 as they've been providing a tasty ~6.5% fully franked yield with minimal volatility. Just a shame it's far easier to sell than buy the shares.

 

[Panaman]

Cap should increase to $30k next year.. Or $35k for those over 50... But as always likely to change!

Thanks, will keep an eye on this.

If I can afford it then will go with the increase, should also have realised that I will have to pay the 15% contributions tax I think ?, so after that I will be investing $21250 per year, not $25,000, the tax being $3750, have actually just had to reset the fortnightly contribution at $850 to account for the tax, before any mathematician tells me I now it works out at a bit more but no doubt I can find a few hundred dollars each year as voluntary contributions to top up and also not forgetting my $699 to run the fund.


Thanks sydboy, if not for a few of your posts would never have come across AYF

 

[Panaman]

Decided to add a bit of my personal savings into the account and have bought some VGE, Vanguard FTSE Emerging Markets ETF as my exposure to offshore shares was small.

Overall though, so far so good

 

[Panaman]

Well I have added a final stock to the mix with another after tax injection from my personal savings, NAOS EMERGING OPPORTUNITIES COMPANY LIMITED (NCC), and i dont plan on adding anymore so my holdings roughly in percentage as of todays price are.

32% in SYI, State Street select high dividend ETF
14% in SSO, State Street Small Ordinary’s ETF
13% in CAM, Listed Shares, Top 300 LIC
12% in BKI, Listed Shares, Top 100 LIC
8% in AYF, Listed Hybrid LIC
5% in BOND, State Street Australian Bond ETF
4% in RCB, Russell Corporate Bond ETF
4% in SLF, State Street Property ETF
4% in VGE, Vanguard Emerging Markets ETF
4% in NCC, NAOS Emerging opportunity’s LIC


I plan to hold all for 10 years+ or until my goal age retirement of 65, all pretty much run themselves and all dividends will be reinvested and as im not a trader that’s what I wanted, will monitor them but to be honest I wouldn’t know if there was a problem with them or not, im relying on the managers of each to do there jobs, dividend yield overall is roughly about 5% at the moment so im happy with that as well

The Vanguard Balanced fund has been going ok and I add $1000 each fortnight from employer and salary sacrifice and will increase the amount each year if the government increases the amount i can salary sacrifice and get the tax benefit, also decided to pay the contributions tax from personal savings added to the super account, this gives me another incentive to save and currently can afford to do so, the fund is a pretty conservative though 50/50 shares and fixed interest etf,s but I figure as I get older and nearer my retirement goal I will want to be more conservative and less volatile and as this will eventually be the largest holding then it makes sense for it to be a lower risk, the individual LIC,s and ETF,s particualy the smaller company ones have a decent time frame to make some significant gains, don’t think I would want to be buying any of these with a couple of years to go as they can swing around a fair bit.

See a lot of people talk about running there own SMSF but very few say how or were they put there money so I hope this gives some idea that the average person can do it with a bit of research, would be interested to here from anyone with comments about my investments, have read that set and forget is not the way to go but im not going to pretend to be a trader, nor do I have the time, knowledge or desire to be one and yes its not proven this will work better than the big Super funds but I have taken how they allocate funds as a blueprint and with mainly ETF,s across the board I should pretty much mirror but also hopefully outperform a bit the better big Super funds overall with my selections while paying a whole lot less fees and charges, $699 a year to esuperfund rather than couple of percent a year to some big bank.

 

[sydboy007]

See a lot of people talk about running there own SMSF but very few say how or were they put there money so I hope this gives some idea that the average person can do it with a bit of research, would be interested to here from anyone with comments about my investments, have read that set and forget is not the way to go but im not going to pretend to be a trader, nor do I have the time, knowledge or desire to be one and yes its not proven this will work better than the big Super funds but I have taken how they allocate funds as a blueprint and with mainly ETF,s across the board I should pretty much mirror but also hopefully outperform a bit the better big Super funds overall with my selections while paying a whole lot less fees and charges, $699 a year to esuperfund rather than couple of percent a year to some big bank.

Just something to think about is that those funds you have invested in all have their internal fees. It's good to keep an eye on them because they do add up. Most are a lot cheaper than what many super fund charge for similar investments thought.

AFI reported they had a MER of 0.18% which seems a pretty good deal for the kind of performance they're providing. A lot of the ETFs seem to be from 0.4% up, but stil pretty cheap fro the diversification they offer.