There was a whole bunch of stuff on inflation we wanted to look at this morning. But we’ll leave that until tomorrow.
Because today our mind is elsewhere. Namely we’re in a race against time to get this month’s issue of Australian Wealth Gameplan out the door.
If you haven’t heard of it before, it’s my recently launched income newsletter. I launched it because I could see a niche in the market for investors who are fed up with being dumped into ‘products’ by their accountants or financial planners.
In many cases, even though the product does give you an income of, say 5% per annum, odds are it’s giving your ‘adviser’ a 0.5% or 1% trailing fee. All for taking a few notes for compliance purposes and then shoving you into the fund that pays them a decent income.
Fortunately, with Australian Wealth Gameplan we don’t have any such conflicts of interest. You pay a small annual subscription and that’s it. We don’t charge you based on the value of your assets, and we don’t skim anything off your profits either.
Every dollar you make is yours – less what the tax man snaffles of course.
But the best thing about it is, if you think we’re wrong, or you don’t like the idea, then guess what, no-one’s forcing you to buy our tip.
Compare that to your super fund which most likely swallowed a bunch of Telstra shares a few weeks ago at a small discount to the market price.
It’s a shame they didn’t wait a few weeks. Because instead of your fund paying $3.47 for the Future Fund’s unwanted Telstra shares, today your fund could have bought them for $3.11. Even a 14 cent dividend isn’t going to make up for that beating.
That’s the problem with managed funds. You have virtually no control over what your fund manager invests in. And if the changes to superannuation are as bad as I believe they’ll be, you’ll have even less control. But I’ll come back to that.
Sure, you could go to one of the fund managers – AXA, AMP, Vanguard, etc., and they’ll tell you it’s “time in the market” not “timing the market.” And that you should just buy a fund because most active investors underperform the market.
Well, that may be the case for active fund managers, but for active individual investors I don’t believe that’s true.
The reason even active fund managers fail to consistently outperform the index is because they are scared of underperforming the index. So what do they do? They buy all the stocks the other fund managers own and then they try and squeeze out an extra few basis points by taking a punt on something else.
Not too big a punt mind you. Big enough to outperform their peers if they’re lucky, but small enough so they won’t underperform by too much if they’re unlucky.
From my experience, most individual investors are a lot cannier than that. They will tend to be less diversified and hold bigger positions in fewer stocks rather than smaller positions in many stocks.
The latter is what a fund manager does, hence their comparatively lower returns.
The fact is, if you put in some effort to do your homework and research your stocks, beating the index isn’t that hard. Take the Australian Wealth Gameplan portfolio as an example.
After just three months already our portfolio of nine stocks has increased by 18.26% (including dividends) compared to a 15.09% return from the S&P/ASX200. And considering three of them have also gone ex-dividend, if you add the dividend payments which are due over the next four weeks then the gain is even greater.
OK, maybe I’m talking my own book here. But do you really think the fund managers are looking out for your best interests when they blindly buy Telstra shares just because all the other managed funds are buying Telstra shares?
In my mind there is no doubt that more investors should start taking more care of their own investments. Leaving it up to the so-called funds management pros is like leaving a baby in the care of wolves.
But taking care of your own investments doesn’t mean doing everything yourself. But it means doing the basics for yourself.
I mean, you change your own light bulbs at home right? I assume you know how to plug in an appliance.
And I’m guessing if you’ve done your homework you could even put up a shelf or two.
Look, by comparison, investing may be harder than changing a light bulb, but it’s a darn sight easier than screwing a shelf to the wall – if you’ve seen your editor’s efforts at DIY you’d know what I mean!
If you’re not convinced that you need to take care of your investments, then just take a look at the bun-fight that’s brewing over superannuation.
If you read all the words that are printed and hear the words that are spoken then you could be forgiven for thinking the policymakers and industry groups are worried about your retirement lifestyle.
Here’s my warning to you…
Don’t believe a word of it. I’m not exaggerating here. When the pollies and the likes of The Association of Superannuation Funds of Australia talk about people living in poverty in retirement, they may be right, but it’s their actions that will ensure it happens.
How so?
Well, the attack on your retirement is two-fold. In fact it’s a pincer movement. You’ve got to be agile and nimble to avoid it.
Unfortunately, there’s a real chance most people won’t avoid it. It’s just a question of whether you’ll be one of that ‘most.’ Or will you be able to thumb your nose at them and get on with planning for retirement for yourself?
The attack from the government is obvious. Politics is about power. And what better way of exerting power over the population than to control how much money individuals have in their pockets.
You only have to look at the twin immoralities of the ‘progressive’ tax system and the compulsory superannuation guarantee to see that money is stolen from your control before you can lay your hands on it.
But I’ll have more on that tomorrow.
As for The Association of Superannuation Funds of Australia, well, they of course want the compulsory super contribution to increase to 12% from the current 9%. Why? Is it as they claim because they are worried about your retirement?
Of course not, they are more interested in getting a 33% increase in the funds that flow into superannuation accounts.
Imagine having that as a windfall to your revenue stream. At a stroke, a 33% increase. The increase in commissions and fees to the super industry will be huge. Is it any wonder they are lobbying so hard to get it through?
And teaming up with the masters of the pressure groups, the trade unions, won’t do their cause any harm either.
Make no mistake, compulsory superannuation is just a tax by another name. But it’s perhaps the cruelest tax of all.
At least with income taxes and consumption taxes and levies and surcharges and every other scam the government comes up with to rob you blind, you know that you’ll never see that money again – apart from the small morsel you can grab back at tax time, if you’re lucky.
Compulsory superannuation on the other hand is a cruel trick to make you believe the money is yours. It’s a cruel trick to make you believe the money is being set aside for your retirement.
That it has to be quarantined out of reach for your own protection. Heaven knows what you might do with it if you were given that 9% to take care of for yourself. Clearly you can’t be trusted.
It’s funny isn’t it? You can be trusted to work a 40-hour week, but you can’t be trusted to look after the reward for that labour for yourself.
Someone else – government, pressure groups, trade unions, fund managers – are deemed to be the ones best suited to doing that.
The reality is, there is only a very slim chance that you’ll get your hands on any of the money that you’re paying into superannuation. The fortunate ones are those that have already got access to their super or will gain access to it within the next 5-10 years.
Chances are for the rest of us we can kiss our super money goodbye. Of course it doesn’t mean you should ignore your super. Because you shouldn’t. You should still try to get as much control over it as you can.
But you should do so on the assumption that you’ll never get to enjoy it. If you do, then well that’s a bonus.
It means you should focus on investments outside of superannuation. Granted, they may not be as tax efficient but at least you’ve got control.
But it does mean one thing. It means you’ve got to focus on improving your returns. And that ain’t gonna happen if you leave it to the fund managers. If you do, it’s almost guaranteed you’ll find yourself coming up short.
Because after seeing their revenue stream increase by 33% the fund managers will be too busy popping champagne corks to worry about investing your money for your retirement.
It’s apt, because at the moment there’s a former Wall Street crook on a speaking tour of Australia. He was nicknamed the ‘Wolf of Wall Street.’
It’s apt because we’ve got our own version here, except what they’re doing is legal and it’s sanctioned by the government. They are the ‘Wolves of Collins Street’ – it’s the funds management and superannuation industry.
Under the protection of regulations and law, they are ripping money out of your wallet for their own benefit and not yours.
Just remember that. But remember this as well, the best person to take responsibility of your money and your investments is you.
Other Stuff on the Markets
The S&P/ASX200 added 0.20% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 56 points. In Europe the FTSE100 gained 0.46% and the CAC40 added 0.58%.
The price of gold in Australian dollars is trading at $1,168.01, while in US Dollars it is trading at $1,007.99. And the price of silver in Aussie dollars is $19.74 and in US Dollars it is $17.03.
The Aussie dollar gained versus the US dollar and Japanese Yen, trading at USD$0.8634, and JPY78.54.
Crude oil closed overnight at USD$70.42.
For the biggest movers on the market yesterday click here…
{ 19 comments… read them below or add one }
Anybody knows what happened to the missing edition of MM, dated 09.15.09 ? Why is it not being posted here?
Is Sayce trying to present a shrinking target by not posting any fresh pronouncements on property for discussion? It could have been an oversight, though, so if anyone should have a direct line to the Ed, please pick up the phone and make the call.
Kris – something of interest for you and your property forcasts. Was speaking to someone from within Commonwealth Bank recently and we discussed clients who had been burned by Storm Financial Planning with its lending and gearing strategies.
An investment loan for 90% of home value was started and then invested in a share portfolio (probably managed by Colonial who are part of CBA). A margin loan was then taken out on the original investment so a punter could have an investment loan of $200,000 from CBA plus margin loan from Colonial Gearing for $400,000.
Of course when markets collapsed, so did these plans with many investors being unable to pay interest on their original investment loan and of course they were sold out of their margin loans on the way down.
Turns out Commonwealth Bank is negotiating with alot of punters to recover loan funds and one offer is they will not enforce the loan if you agree to sign over your property to them when you die – in other words your house goes to CBA instead of your chosen beneficiaries.
This is a great offer from CBA and obviously another very cunning move to protect their doubtful debts. Where will they stop – I agree with all of your comments on property and let’s hope when the crash comes, all of our banks get a decent kick in the guts.
I totally agree! My super fund is back to where it was 10 years ago! In a decade it has gone nowhere yet the managers still take their pound of flesh. In the same period I have a modest brokerage account that has tripled since 2000 and only lost about 20% in the current downturn and I consider myself a total novice in investing.
I’m sure if I just stuck my super in an index fund I would beat 90% of the managed super funds
Jason, whatever you have left, you may consider taking your money from these gangsters and managing it yourself in a SMSF. That way you will have control of your own savings and you will not have to pay these idiots for robbing you blind. Never think that somebody else will look after your interests than you can. Good luck.
You can buy and sell shares from a SMSF, if that is what you are good at, or even CFDs on leverage, if you are one for high stakes. So, with the same effort that you put in with your current trading/investing portfolio, you can simply mirror your trades in the SMSF. It is your money, after all, and if lose it, you will only have yourself to kick for it. But at the same time, you will probably take far greater care not to lose it, than these fat cats who will be paid anyhow, or worse, they will be paid more if they recklessly gamble with your money.
hi CB
I have looked at SMSF as an option, but the costs required to satsify the “regulations” are astronomical! I’m talking about the yearly audit fees and tax returns that need to be done. I’m assuming the accounting sector has seen this as a massive milkcow to be milked to the core, as they probably reckon most people who move over to a SMSF have hundreds of thousands of dollars in the fund and can therefore quite easily afford to pay thousands of dollars to have the audit and tax return done.
In my case i only have around ten thousand dollars in my super (i emigrated to Australia less than 3 years ago) and for me to pay thousandsof dollars in accounting fees every year would gobble up a very large proportion of my yearly contribution to super.
However I very much want to take control of my super via a SMSF – it just seems so unfair that the system is so draconian by design! It’s supposedly MY MONEY, yet i’m forced to waste thousands of dollars in “compliance” fees – on a yearly basis – and what for???
why does this have to be done year in and your out? why for instance cant the fund be audited and have a tax return done some day when i want to actually draw a benefit from it?? In the meantime why cant i simply be allowed to invest MY OWN money in the fund without having to pay thousands to accountants?
To my mind the system stinks!
Sandra an SMSF is a great option if you have substantial super funds. If you don’t have $200,000 or more forget it.
Hi Sandra,
I could not agree with you more. And, Kris is warning also that worse is to come for superfunds. He could be right, as a lot of people have put in tons of dough into their super when govt advertised the 1 million contribution cap a couple of years ago, and now, of late, there are more and more signs that the govt is eyeing all those savings sitting in super, and they are no doubt scheming away in their little Canberra dungeons of how to scam the people of their savings. Anyhow ……
PF is right, unless you can find a low cost service. I would love to help you, but just don’t know how to, as I cannot or should not post here the name of the advisor/accountant/auditor (all bundled together in one service), which costs me less than half of anything else I have seen on offer. So, PF is correct if you go with the standard service providers, but there is another way, a perfectly acceptable low cost way, and if you expect to be putting in more money in the future, then you should look at doing it. I just wish I could tell you more, except I don’t quite know how.
But even at, say, $750 per annum, it is a 7.5% hit against 10k under management, so until you build up a little bit you would probably be best off by taking your funds to an industry superfund. While working in academia I was with Unisuper, for example, and they charged proportinately to funds under management, and if I remember it right, their fee never exceeded 1%. You are at perfect liberty to check out industry superfunds and roll over your current funds into one of them and at least take advantage of their low fees until you build funds up sufficiently to justify a $750 pa expense for doing your returns and auditing for compliance.
Hey, Sandra, I have just thought of something. If you would care to click on Peter Fraser’s name, it will take you to his public website. I am sure that he would be happy to pass on your email, or contact number if you ask him nicely, and once that is doen, I could contact him for it, and drop you a line with the information you might be after. That, I think, would be a safe way to do it. Cheers.
A thought about superfunds and what govt might do to our savings in super. I think that Kris’s warnings are well justified, and at this stage we simply don’t know whether govt will try using our savings in super with a carrot or a stick. Seeing the way they have just taken the stick to Telstra, I would not trust them as far as you could throw any of them.
But, insofar as the carrot approach will be present in any future legislation, at least if you have your savings in your own SMSF, you will have a choice and can resist being sucked into schemes and scams dreamed up by the Canberra pollies and their lackies. By contrast, if you have your savings in a fund, then the fund managers will make those decisions and will happily squander your money for you for the fees they take out of your savings year in, year out. So, I would say, the more self reliant you become, and the more control you can have over your own savings in super, probably the better it is going to be for you. Or at least you won’t have to whinge about anybody else, if you stuff up and wipe yourself out.
CB I agree an industry super fund is probably a better option for most. Don’t forget that they can and should be involved in what market segment they choose, but actual shares, the manager looks after that I’m afraid.
For those who have taken a big hit though, don’t just pull your money out and not avail yourselves of the upswing. Shares have rallied by about 50% just in the last five months.
Yes, that’s right. They offer quite a good selection of asset classes and mixes, so you can choose between riskier and less risky asset mixes, and you can even sit 100% in cash, which some would consider being a sitting duck for inflation for any extended period. You can have, I think, at least one free change per year, between investment strategies.
“”"”What changed in 1998? Why should house prices have taken off so quickly after being stagnant for nearly three decades?”"”
I’LL TELL YOU WHAT HAPPENED ,,i & many other people were sitting on the sidelines ummming & ahhhrrring ,after the 1990-94 recession,,, confidence knocked down ,,,to upgrade the 1950’s -60’s out of date house,,,,, when they (libs) were toying round with the GST 10% in 97-98
ONCE IT WAS SET IN place ,,the gst to be implemented in year 2000
well that was it,,
everyone bolted out of the gates to go & upgrade
to beat the 10% hike in the land & house prices,,,,,,,,,,say @ that time up to an extra 50K or more ,,alot of dough then & now ,,hard enough to save 50$ a week let alone 50K
& we had to run to beat the GST ,WHICH WAS A DECIDING FACTOR ,to push people over the line to beat impending price rises ,,,
needless to say house builders were absolutely INDUNUNNATED WITH BUILDING ORDERS
believe it or not ………………..
Thanks, etch. I almost forgot that “minor” event. That is indeed how it was. And guess what? There is still no end in sight for manipulation and meddling. The bigger the govt gets, the more bureaucrats there are, the more meddling there is going to be. It is just so hard to form a reliable expectation into the future, and with all the meddling and scheming going on in bureaucratic dungeons, it becomes almost hopeless. Just see the latest little clever plan they have come up with Telstra, after it was flogged off to the people. Enough to make you sick.
and guess who is going to pay if some of the big Telstra shareholders sue the government over the whole debacle?
If you answered the nitwit politicians and bureaucrats who have dreamed up the scam, I like your sense of humour.
“”"”"”"If you answered the nitwit politicians and bureaucrats who have dreamed up the scam “”"”"”"”
nah thats the “commonsense approach”
the trusty good ole taxpayer of course,,,,,,,,,,,,
People seem to forget that the GST was NOT an additional tax (even though there may have been an incremental element in it) as most of the other tax rates in at the time WERE REPLACED by the GST. Now that the GST has settled down it has replaced most of the other taxes that were in place and is acceptable!
If anyone is interested in an LIC they might like to look at Sylvastate (SYL ) on the ASX that only charges around 0.3% fees that is far below nearly all other LIC’s.
You are right, PFT. The creep must have been quite massive, however, as they are collecting vastly more than before. Prices did adjust higher on a lot of things, and that was why there was such a scramble for people to buy and build before it took effect. And whatever escaped the GST (fresh food, etc.), will be captured by the Clean Energy taxes and targets and initiatives. This al-encompassing tax grab will dwarf even the GST. It will be a massive, inescapable vacuum that will suck us all dry and will enable our politicians to make Christmas an every day event for all of us who behave. Ah, too much to this, for this late in the night.
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