He bargain hunters I am just starting my first job and have been asked to choose a super account. My problem is the sheer number of options. Initially I was thinking about AustralianSuper but they have terrible reviews. To make things easier I am setting up a poll.
Your advice would be much appreciated.
Cheers
The employer did not recommend any. I explicitly asked and they said its your choice.
Hostplus - Indexed Balanced
Terrible advice for somebody starting out.
Focus on high growth, something like 50% AU growth 50% global growth.
Index balanced is suitable for somebody in their 50s or 60s seeking to retire and not wanting as much volatility.
Agree. Still young get some medium to high risk funds, but not very high. spread evenly.
Hostplus - Indexed Balanced
37.5% to Australian Shares, 37.5% to International Shares, 15% to Fixed Income and 10% to Cash
What do you call that again ?
I call it a quarter of the investment earning substantially below the best returns.
Why would you want 1/4th of your money earning 3% when the other 75% is earning over 10%?
The reduced volatility is useful if you are planning to make a withdrawal in the short term, but even somebody approaching retirement will want to keep high exposure to equities as they need to earn substantial returns to fund the remaining 20 years of their retirement (the saying is you earn 50% of your retirement investment returns after you retire).
Don't be too concerned, a lot of people calculate their super risk profile wrong, but if you were in the OP position, you could be missing out on $100k of extra balance when you retire by choosing the balanced option.
we all want 100% earning over 10% , but you know it's not guaranteed hence the "could".
a super with 75% on shares @ 0.02% fee + $78 p.a. admin
anything else similar ?
Index balanced option with hostplus is 0.02% + annual fee per annum. Compare that with a higher fee'd account that probably isn't going to beat the market anyway and you've got yourself a bad time in the long run as you will lose out on compounding growth.
The indexed balanced fund has performed quite well over time with only a couple of other funds outperforming it.
By all means you can go ahead and try a more risky option, but if your higher risk portfolio comes crashing down by 50% (as opposed to the index balanced option which won't go down anywhere near as much) - you'll need the market to increase by 100% to get back to where you were (not taking into account the extra fees dragging you down).
@phunkydude:
Consider the OP's position.
Their first pay packet will include maybe $200 for super.
Why would you want to put $50 of that in a low yield investment mix?
When you have no asset base, or a very low asset base, putting a portion of it in a protective investment is a wasted opportunity.
@rambutann:
I agree that low fees are very important, and the only certain part of the decision.
And it happens that past returns for this particular investment have been as good as the growth option (shares plus) this fund recommends for young people. We all know past performance is no guarantee of future returns, and it could be argued reversion to the mean actually suggests in the future this balanced fund is likely to more significantly underperform the shares plus option, if the managers get their stated goals of average returns correct.
And again, consider the OP. If their super investment crashes by 50% anytime in the next few years they have lost a few thousand dollars, at most. But with 40 years ahead of them, and 40+ years of contributions yet to be made, they can invest differently to somebody who has a lump sum and must shepherd it.
They should chase the highest growth they can find.
Most super funds just invest in a share index. Hardly diversified. I like cbus as they also have property, infrastructure and private equity amongst other investments. Just under half the fund is in shares.
All super funds offer a range of investments. You can pick all shares in cbus or anywhere else, or no shares at all. Super is just a tax arrangement.
I'd suggest avoiding the banks and the "for profit" supers - and go for one of the industry funds. You've largely done that in your poll.
In general terms, the for profit funds have higher fees, and cannot guarantee returns to offset.
Per Seraphin's advice …
Any of the balanced funds will diversify your portfolio.
You might consider avoiding the cash asset class, as it usually has a lower return than shares.
As always, past performance is no guarantee of future performance.
Diversity isn't an advantage for somebody who will have no chance to withdraw for many decades. Concentrated risk and return in high growth options are best.
Avoiding cash is correct, but also likely bonds and anything that says balanced, safe, capital protected or anything else that sounds reliable and safe ;-)
Low fees (which means industry super in your circumstances), high growth investment option, and consider if you want the life insurance (no, unless you have dependents) as that money could be better spent adding to your retirement nest egg. If you want to be ahead from day one, ask the payroll to deposit an extra $10 a week in your super. If you are on a low income, the gov will match it (in which case it is important to tell the payroll you wish to make it an after tax contribution):
https://www.ato.gov.au/Individuals/Super/In-detail/Growing/S…
Free money (albeit money you can't touch till you are old).
At the start of the career, you should be focused on growth assets and as you reach retirement, the portfolio should tilt towards cash and fixed income.
I moved to CareSuper after being with AMP for years based on work choice fund. The increase in return with Care has been fantastic.
Thank you guys I have reached a decision. I would like to thank everyone for their valuable feedback specially mskeggs. Moderator kindly close the thread.
What fund has your employer offered as their default fund?
If you are just starting out in full time employment, the key will be to find a fund that is low on fees, particularly fixed dollar fees. Fees that are a percentage of your investment will be less of an issue in the early stages, although shouldn't be ignored.
Don't get too caught up on the bells and whistles of the fund, different investment options, etc. at this stage. For the first five years or more your contributions are going to drive your account balance more than anything else, barring a market meltdown. Just check that it has a range of investment options linked to risk profiles.
Generally speaking, young people should be accepting higher levels of risk in their super, but you need to make your own decisions in that regard. It may therefore suit you to look for a fund that has investment options linked to your age. These will created blended portfolios that have higher risk assets over your 20 - 40s and then starts to taper off the risk towards retirement.
I see you've included ANZ Smart Choice in your poll. I'm quite familiar with that product and it fits many of the above criteria. Whether or not that is the best option for you is a separate matter and I can't comment on the precise differences between it and other products you've named or others that may be suitable.