Hi, I am writing to seek advice regarding investment strategy for superannuation. I am with REST and have about 11k in super. Age 21.
I was planning to diversify into high risk investment as all my funds are as cash asset. However due to COVID I did not.
I have always thought of doing it but I have no idea how this works. I am open to switch to different fund. I guess I can afford to go in high risk at this age.
Thanks in advance
Just look for a growth or high growth fund in your super. or study the splits they do in those funds and split it up yourself.
You have all the time in the world to be aggressive. maybe a split of 70/30 high risk vs safe etc.
Thanks unclesnake
The advice from Barefoot Investor and the likes of contemporary financial gurus (ergo Dave Ramsey), is to use the cheapest Superannuation provider (cost wise) and max out your Super. Sticking to the S&P/Main portfolios, as the gains have been superior to actual paid financial advisors who go for riskier stocks that more-often-than-not don't pan out favourably.
But $11k in Super at the age of 21 is impressive, so just keep swimming : )
thanks kangal
Get it out while you can.
Tax advantage of super is incredible. It's unreasonable to expect get anywhere close with ordinary investing.
Tell that to those retiring this year with 30% less.
All investments have risk. Better to put it under a mattress?
Also those people won't pull all their money out now, it'll average out over a while.
Tell that to those that left it in then GFC hit, know some that lost $250k-$450k.
Well done, more fake news.
I went through the GFC. Yes I took a 30% hit on my peak balance (which was far higher than the actual capital I'd put in) but that was because of a shonky superannuation company with some very unrealistic property valuations.
I left it in that account to fix itself and it had recovered by 2013 (5 years).
The thing is, you don't pull your super out all in one hit. You draw down over many years.
Yup, sounds reasonable for OP to retire at 21.
Tell that to those retiring this year with 30% less
If they've got 30% less than their balance peak then they have really stuffed up. Probably by shifting units to cash when the market was at the bottom.
I'm a beezdick shy of 59 and in a very aggressive asset allocation. I had 13 units, it fell to 10 units and is now at 12 units.
Even if it is 30% less, is that less than the peak or less than what they put in? Again, if it's 30% less than their capital then they really haven't paid a lot of attention since 1992 when Superannuation Guarantee was introduced.
Seriously mate, get your facts straight before putting your mouth in drive.
@[Deactivated]: Is that the best you've got? You don't think I've heard that before? You do know what the Baby Boomer generation was don't you?
You come with a load of old waffle and then can't defend it with fact.
Tax advantage of super is incredible
Depends on your income. It could actually be worse for some people.
That's true, but if you're making that little, you'll be so limited on investment opportunities anyway (Or very young).
The value is not just in the concessional rate, it's the no tax on growth part.
Speaking purely of investment strategy, at 21 you need to be looking for growth and high growth options. You need to have it front of mind that you won't be getting your hands on it for 40-odd years and the growth you will enjoy over that period will more than outweigh the downturns you will encounter over that travel.
You will do well to consider the chart in the attached
Rest almost certainly will give you access to qualified financial advice to advise on your super strategy at no additional cost. Most industry funds do
I've tried that advice and have only been disappointed. They are very restricted in what they can tell you until (surprise) you give them some money.
Yeah not very helpful. I have only contacted them through their online channel though
Not really going to advise of strategy but I highly recommend you go in to cancel the insurances if your job is stable. I did and am saving around $500/year.
The insurance in Super is for providing help to the person or their dependents, if the person suffers death or disability.
Having a "stable job" will not protect a person from death or disability.
At 21, OP is very unlikely to have dependents. It's very easy to cherry pick scenarios, but OP would need to look at his own circumstances and evaluate accordingly.
Most people don't realise that the death and dismemberment crap is a scam. When I first checked my super Cbus were bleeding me $40-50 a month. I cut that nonsense off on the spot.
Hmmm? That’s not an unreasonable price? Might feel like a scam until you injure yourself at work and can no longer earn an income… $50 suddenly might seem like better value. I guess there’s always Centrelink.
If you have no debt & no dependents the ditch the insurance unless you have a good reason not to.
If you are 21 then get aggressive with your investment but look at the investment fees. I'd aim for <1%
REST charge the following fees:
$1.30/week admin fee = $67.60
+ 0.1% of your balance ($800 cap)
+ 0.07% "Indirect Cost Ratio" which means "We need to squeeze the lemon harder"
The investment fee for cash is 0.02% of your balance.
If you switch to 100% High Growth then they will charge you 0.73% of the balance.
Without looking really hard at the asset allocation I'd consider the following:
50% in the Balanced-Indexed which will give you 25% cash/bonds (defensive), 30% Au shares and 45% O/S shares. There are no fees.
25% Australian Shares - Indexed. No fees
25% O/S shares - Indexed. No fees
The end result is (approx) 12% cash/bonds; 40% AU shares; 48% O/S shares. Because they are in index funds there isn't some ego playing with your money - the market decides and the risk is spread over thousands of companies and you aren't being bent over with fees.
So all up you pay ~$110 admin and management fees on your $21k.
I'm sure there's a better deal but this is up there in the top 10 IMO.
That makes sense. Thanks for the info
NB you forgot to turn the page in the REST PDS for the rest of the fees EG High Growth also has implicit and explicit costs of 0.22%, borrowing and property costs of 0.14% and they charge a margin on the buy/sell price of units in the fund of ~0.08%. So the REST Admin + High Growth fund actual running cost is ~1.27% + $67.60 pa which is another 0.6% on $11,000. Someone mentioned HostPlus Index fund at 0.05% which is closer to the truth as the investment team isnt managing anything themselves. Unfortunately the industry funds carried on about fees for so long, now thats all anyone thinks about, not considering that sometimes paying a bit more can get you a lot more eg who cares if a fund is 0.8% more expensive if the investment return was 2.8% better. So if you are going to 'compare the pair' check ALL the fees and then also try to compare the returns - this can be hard because they make it hard on purpose, before/after tax, different time periods. And also convert the % difference into actual dollars a 0.5% difference for you now is $55 per year, not really a big deal, and even with 10x the amount the difference is only $550 pa, not nothing but also not huge on $110,000 investment. Find somewhere that is easy to deal with ie the call centre doesnt take 2 hours or you can do everything online, a range of investment choices and relative clarity on fees, investments and returns. Hop onto finametrica site and check on your personal risk profile, considering your Super money has a 40 year timeframe, so 70 - 90% Growth should be ok, allowing for a higher level of volatility in the shorter term. As for insurance, you prob dont need death cover yet, industry fund TPD insurance is mostly bad definitions now but still ok if you have a car accident and are f*d, but Income Protection should be worthwhile, its personal sick leave so you dont have to go to Centrelink or your parents house if you cant work for an extended period/again. Good luck.
Call me a barefoot, but Hostplus index is 0.05% fees plus $1.50/week. Low fee, reasonable returns. Make sure you compare the insurance products, that could easily cost you more when you are younger / lower balance than the management fees. Your employers fund may offer you a cheaper insurance product, so always take it into account.
[Deactivated] on 09/07/2020 - 18:00 Comment score below threshold.
