(03) 9020 2905I do love a “do you want the good news, or the bad news” scenario. A little bit Divinyls’ “Pleasure and Pain” all rolled into one.
Good news first, or the bad news? And which choice makes me a glass half-full, or glass half-empty, sort of guy?
Choosing the good news first means you’re setting yourself up to end with a disappointment.
Just like watching Kevin Costner’s Waterworld. Oh, wait on. That was just a stinker. That started with overblown, over-budget disappointment, middled with predictably pathetic, and ended with “Bugger, there’s 135 minutes of my life I’ll never get back”.
Picking the bad news first option gives you the kick in the guts, followed by a bowl of marshmallows that would taste nice, but for the pain in your guts.
Yep, I’m going to offer you one now. Do you want the good news or the bad news first? Huh? Can’t hear you?
Okay, we’ll go with the good news.
You probably received your superannuation statement recently. That’s the one that covered your fund (or funds) to June.
If you, like about 80 per cent of Australians, are sitting in the default balanced fund, your return was about 7 to 8 per cent. Some a little better, some a little worse.
That’s pretty good news. Inflation was sitting around 3.6 per cent for the same period, so your balanced fund roughly doubled that. Not something to pop the Moet over, but better than a kick in the guts.
Now, the bad news.
Since then, pretty much all of those gains have been decimated in a global shares and property fire sale that Jen Hawkins’ Myer would be proud of. Squandered down a deep black hole.
This black hole is called “Europe”.
With due respect to my Greek and Italian friends, it’s your fault. You owe us a few drinks. And to my Spanish companions: “obtener su billetera. Tu eres el proximo”. That is, roughly translated, “Get your wallet out. You’re next.”
But this is no typical good news/bad news storyline. I’ve got some more good news. (And after that, I’ve got some steak knives!)
I know it’s an almost meaningless mantra, but superannuation IS a long-term thing. The problem is that right now, even the long-term returns are looking as anaemic as Silas the murdering albino from “The Da Vinci Code”.
According to Superratings, the three-year rolling return to September was 1.1 per cent. The five-year rolling return is worse at 0.92 per cent. Even at 10 years, it’s just 5.16 per cent.
So, if you’re 45 or under, forget the “super disaster” headlines. The first thing, if you’re not within a decade of retirement, is that you need to have a little faith that investment markets will do their thing.
Here’s are the questions us young’uns need to focus on to make the most of our super. How is your super invested? How much insurance do you need? How many super funds do you have?
How are you invested?
This is essentially about “how long until you reach 60?” The younger you are, technically, the more aggressively you should be invested. Time is on your side. If you’re in your 20s, 30s or 40s, consider switching from a balanced fund to something like a “growth” fund that reflects the fact that you have decades until retirement. This will give you more exposure to shares and property, which should have better growth over the longer term.
How many super funds?
Don’t just roll them all into the one that’s done the best in the last year. Last year’s winner could be this year’s dunce. Ask about fees. Find out what insurances you currently have, and can get, with them.
What insurance do you need?
Always consider insurance when deciding which super fund you want, or which super fund you’re going to roll all of your super funds into. If you’ve got a partner, young kids, and a big mortgage, then consider what happens if you die.
And now … the steak knives.
Keep this in mind. If you’re young, the markets being down is actually a good thing for you. If you, or your employer, are contributing to super now, you’re buying assets at today’s fire sale prices.
That, I think, is “glass half full”.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .