New to Super

Lpr0o on 25/08/2021 - 13:30
Last edited 25/08/2021 - 13:31

Hi, I have always followed Ozbargain as a guest but signed up now as I think, the community here is very knowledgeable and participating on forums would definitely help me a lot.

Just recently started working on TFN for first time in my life, and have always worked on ABN in my previous years.

Now, I have around $2500 in Super and I am with AustralianSuper. I have always wondered if I will ever gain interest or earning on this super, but it never moved up or down.

So, I explored my account and found that my balance investment was 100% with Cash.

Since, this is extra cash for now and I am willing to risk it. I have made some changes on how my balance investment would be used from now on.

My current investment is below:
High Growth - 50%
Balanced - 30%
Indexed Diversified - 10%
Australian Shares - 5%
International Shares - 5%

How do you think my portfolio is? Any views/opinion?

and what is your portfolio?

Thanks.

Financial

Comments

  • daalinz on 25/08/2021 - 13:38
    -5

    I've got AusSuper as well and I invest 100% in international shares. I switch to Cash when there's a financial crisis.

    But ultimately depends on how often you are going to check it. If you don't ever want to check it, set to Balanced or Growth and check it during a financial crisis to make sure it's not going negative.

    Personally I'd only diversify if I was worried about living off super later in life. I'm opting to rather invest in shares and ETFs and live off that rather than rely on super.

    • happydude on 25/08/2021 - 16:13
      +4

      When it goes negative you are also buying units at the lower rate. You then get the benefit of the bounce on the way back up. If you have money going in as cash you can be worse off when you convert back to shares.

      Trying to "time the market" is incredibly difficult.

      • grips on 26/08/2021 - 16:42

        There are no units in AustralianSuper, only money

      • Peck on 26/08/2021 - 17:06
        +2

        Reminds me of an old saying, that the young may not have heard.
        "It's time in the market, not timing the market" …. that is important.

  • tsunamisurfer on 25/08/2021 - 13:38
    +7

    There are many factors that go into investing in Super.

    Your age / how much longer you will keep working for is a big determinant.

    If you are young and just starting out in your career, generally people place their super into high growth (higher risk) investments as they can afford to ride the highs and lows of the market.

    As you get closer to retirement, people tend to be more risk adverse and place their monies in balanced or more defensive investments since they will retire soon and will not be able to wait for the market to recover should there be a big drop.

  • Shadowsfury on 25/08/2021 - 13:44
    +8

    If you're anything under 50 I'd stick it in High Growth and basically pretend its not there unless you want to add to it (and don't attempt to time the movement of it unless you're experienced - and even then its debatable). The ready made diversified options already have split the investments into various categories so you don't need to unless you have a particular belief

    After that age you can start moving it into some more defensive assets to preserve your balance by the time you're ready to access it.

    Check your insurance coverage within super to ensure its appropriate for your needs so that you aren't paying for unnecessary insurance (or realise you are short). Right now if you have $2.5k its probably switched off.

  • rektrading on 25/08/2021 - 13:45
    -4

    100% in digital assets and 100% self-custody.

    • netjock on 25/08/2021 - 14:08

      If it is digital and self custody isn't that an oxy moron? Unless you upload your conscience.

  • Drakesy on 25/08/2021 - 14:01

    It's a good start,
    If you don't have any dependents you might want to switch off your insurances as well as previously stated.
    I'm with Australian super and 100% in balanced.

    If could forsee sharemarket crashes i'd change to cash, but unfortunately i don't have a crystal ball. thinking of going high growth (however in Aussuper's case High growth is a lot more risk for marginal reward).

    • pr0o on 25/08/2021 - 14:17

      How do I switch off any insurances with my Super?

    • FirstWizard on 25/08/2021 - 14:44

      exactly!!

      The worst thing you can do is to sell and switch it to cash after a crisis has happened when the market is down.
      So unless your tea-leaves tell you the market is going to crash in the next week or so (noting that it takes few days for them to actually change those investments) best to just leave it.

  • Caped Baldy on 25/08/2021 - 14:12

    Depends on your age.

    If younger I would switch balanced to aus/international shares.

    Should consider changing or removing life insurance and job insurance. You'll have to assess that risk yourself.

    • pr0o on 25/08/2021 - 14:17

      How do I switch off any insurances with my Super?

      • Caped Baldy on 25/08/2021 - 14:27

        Log into Aussuper. There's an option for "My Insurance" on the left hand side. I've turned mine off but it should say how much it's costing you.
        I think these were costing me $500-$1000 each year.

      • avoidfullprice on 25/08/2021 - 14:34
        +1

        Call the free financial advisor from your super and get an understanding what this means to you.

  • QuickdraW on 25/08/2021 - 14:27

    Would go all in high growth but the biggest problem with low balance is fees, minimising these will do more for you than investment choice till you get around 10k.

  • lawyerz on 25/08/2021 - 14:36
    +2

    I would probably start by reading Barefoot investor. I find his advice to be good advice for most people.

    If you are young which it sounds like you are; he recommends an index funds with the lowest possible fees, which he specifically recommends: https://hostplus.com.au/indexed-balanced.

    It also means he recommends (and I concur) against leaving your super in "balanced" or "high growth" default categories, as those are generally active funds and command much, much higher fees. If you just want a simple option, index funds with lowest fees is simply the way to go, and it happens hostplus is the lowest at the moment.

    The TLDR version is; fees is your real enemy for super long term investing, active investing does not return a higher than market return 80% of the time (I saw this stat specifically for aus, there's a source somewhere). Note this is also the advice of Warren Buffet for most people https://www.youtube.com/watch?v=sWVVazhSFuE.

    Historical numbers is on the side of this advice, which I would consider solid advice - but as with all advice, please consider your own situation and/or hire a fee-for-service financial advisor. Probably also put a grain of salt on all advice you read on forums, whether its here, or anywhere else.

    • peterwilliams83 on 25/08/2021 - 15:53
      +2

      Hostplus had an 8.15% average annual return over the last 10 years for their index balanced fund.
      AustralianSuper's 'High Growth' option had a 10.64% return over the last 10 years.

      Index funds can't invest in assets that are unlisted, so you may miss out on growth opportunities associated with unlisted assets (things not available to buy on the sharemarket).

      • lawyerz on 25/08/2021 - 16:03
        +1

        I could do some work to pull out counter arguments but I have enough to do at work.

        I'd say you need to factor in the fees, as well as a 40 year timeframe, not 10.

        Anyway you do you..

        • avoidfullprice on 25/08/2021 - 17:26
          +2

          For OP who is new to super but understand diversified investment, barefoot investor is a good read. It will help with his financial discipline. OP just have 2500, it needs to grow, and that book helps.

          However, you misquoted his recommendation against high growth. In fact he suggests young people should be in high-growth super offerings. Just need to be wary past performance is not an indication of the future, and high fees investment will eat the balance on top on a negative return year.

    • BrettSh on 26/08/2021 - 09:33

      lawyerz has the best suggestion of all, read The Barefoot Investor.

  • yzha3917 on 25/08/2021 - 14:40
    +1

    Can I ask why you are investing in different pre-mix options?

    For diversification, maybe just investment in Indexed Diversified, and its admin cost is lowest in AustraliaSuper.
    For high performance, maybe just in High Growth?
    For balance, well, there is Balanced.

    Each pre-mix option includes a porfolio of all sorts of investments (Au stocks, International stocks, cash, bonds, etc.) but in different ratio.
    And remember, there are professional investment managers behind these options, fine-tuning these ratio periodically, to achieve goals for each option.

    By mixing all these pre-mix options, you are essentially creating a porfolio of all investments, in a ratio that does not necessarily making much sense.

    I think Super should be kept simple. Choose one option.

    If you do feel adventuous, set up a trade account, create a porfolio for your own taste (I like your international stock holdings.)
    You can do it inside the Super, but probably not worth it, due to the extra admin/management cost.
    Either way, that will be a hard journey.

    Good luck.

  • p1 ama on 25/08/2021 - 14:41
    -1

    In general, if you don't know anything about finance, put it in "balanced" and forget about it. Let the fund managers decide what is best.

    If you have significant investments elsewhere, it might then be worth thinking about diversification - e.g. if you have significant money in AU shares, then you can diversify your superannuation into other asset classes.

    FWIW, the main benefit that a superannuation fund can offer you is diversification through access to asset classes and assets that regular investors usually would not have the scale to access. For example, infrastructure, commercial property, private equity…etc. If you already have significant money in the ASX200, you should definitely take advantage of this.

    In regards to trying to move your money around to "beat the market" - there's plenty of evidence that in the long run, this is really not that effective.

    • Peck on 26/08/2021 - 12:44

      I agree to a point, as I think that Balanced option is the normal default option. However I also believe that the longer the period of time that you have, then the more aggressive your Super should be, and as you get closer to retirement step move towards conservative. I recall seeing tables showing options and period of time to be invested in the options.

      • p1 ama on 26/08/2021 - 13:45

        Agree that, in general, the further out your investment horizon is the more aggressive your super should be. However, something to keep in mind is that most "high growth" options are simply piling a larger percentage of your investments into equities and away from alternative assets and real estate.

        If you have no other investments, then fine. If you have a significant chunk of your net worth in equities, e.g. through an ETF let's say, then you would want to consider the diversification benefits you might get from having your superannuation not in equities.

  • pr0o on 25/08/2021 - 14:57
    +3

    Thanks guy for your suggestions.

    I have put 100% in High Growth for now, as I am 26 years old and I am willing to take risk until it at least reaches $20k(?).

    • p1 ama on 25/08/2021 - 15:00

      I have put 100% in High Growth for now, as I am 26 years old and I am willing to take risk until it at least reaches $20k(?).

      Why $20K? You'll probably have that much within maybe 2 - 3 years of working?

    • Gareth on 25/08/2021 - 16:49

      To reinforce what some of the other advice you've received, if you're happy with a High Growth pattern, leave it like that until you're 10-15 years out from retiring.

      When you're within the 10-15 year period (depending upon your comfort), pick a high point in the market (like now, presumably) and transfer it to a less risky offering to prevent a major loss should the market change rapidly.

      In the meantime you're going to see highs and lows - just ignore them.

    • moar bargains on 26/08/2021 - 12:20

      Just leave it in High Growth until you're ~5-10 years away from retirement.

  • BHR on 25/08/2021 - 16:49

    100% High Growth, additional contributions if you can afford it, shouldn’t need to change a thing or take more interest in it than that until your 40s. (Except maybe the life insurance… what are you protecting against and do you need it)

  • imagele90 on 25/08/2021 - 19:50

    Start salary sacrificing if you can .

  • poboy on 25/08/2021 - 20:05
    1. Go the high growth option
    2. Check off the index for Aus and international shares had a cheaper management fee. If so, consider splitting 40/60.

    This is financial advice.

  • blueyez on 25/08/2021 - 23:15

    Are you planning to put in more money yourself?

    If your balance is likely to stay under $6,000 I would recommend moving your super to Prime Super as they don't charge admin fees for balances under 6k, then decide whether you're happy to stay or move it elsewhere once you're near the 6k mark.

    If you're far from retirement then high growth or a higher risk investment might be worth looking into. Depends on your risk appetite.

    Insurance is a double edged sword - could you afford to live if you were unable to work? Income protection, TPD & Death cover all have a purpose so it's worth looking into it before deciding to cancel. Yes they cost fees, as does most insurance cover.

  • rmw on 25/08/2021 - 23:58

    Couple of good time investments would be reading barefoot and making money made simple (Noel Whittaker). Barefoot first it’s a bit easier to digest.

    If you can make pre tax contributions - it’s hard to set aside at 26yo - but govt chips in 50c for each dollar up provided you meet income eligibility, to max $500 govt contribution for your contribution of $1000.

    https://hostplus.com.au/super/maximise-your-super/government…

    Fees matter a lot - eg 0.07% per annnum is only $7 per $10k balance. Generally you want something passively managed for the bulk of your investments.

    Performance matters - it’s worth comparing performance not just fees between different providers.

    Don’t do the barefoot default balanced option that’s got like 25% cash. If I could go way back in time to 26 I’d just throw 50% on aus shares broad based index and 50% intl shares. Host plus equivalents of these are IFM Aus shares (costs 0.03% pa) and their International Shares (INDEXED) hedged and unhedged. Aus share funds benefit from franking credits but intl shares are required for diversification and different return opportunities.

    Not specific advice pls do your own research and seek advice relevant to your circumstances but can say the books and getting that co contribution (if eligible) are easy wins.

  • TilacVIP on 26/08/2021 - 08:42

    All I can add is stay with Australian Super. They have been great for me over the past 12 years. Great performance and low fees.

    Wish I had actually pumped more of my own money into the fund.

    At the OP's age, I'd go aggressive all the way & add some money in wherever possible. You'll be glad you did when you reach you're late 50's, early 60's

  • cashless on 26/08/2021 - 09:28

    If you are young and independent (you said you're 26?) and you have the opportunity, then salary sacrifice is a good option.
    It's not exciting, but it's a good way to prepare for the future.
    You can tip in (for 2021/22) up to $27,500 pa (super concessional contributions), an amount which includes your Super Guarantee.
    So, just for example, suppose you earn $80,000 per annum, your Super Guarantee would be $8,000 per annum into Australian Super through mandatory govt. contributions. That means you can sacrifice a further $19,500 from your pretax pay, if you could afford it.
    I'm not suggesting you contribute the maximum. Most people cannot afford to lose that much from their annual salary (due to bills, living expenses, mortgage, rent etc), but just putting a little more into super now in a tax efficient way means you should see the benefits in 35 to 40 years time when you retire.

  • OzHunterNSW on 26/08/2021 - 10:12

    No wonder it has remained dormant… cash is a haven.

    You missed the boat unfortunately. The moment the shares plummeted, I transferred everything over into HIGH GROWTH.

    Thus, as the shares rebounded, so did my portfolio. A whooping 20K and I am ecstatic !

    So… toss it all into hight growth, preferably, Asian stocks.

  • afah0447 on 26/08/2021 - 12:41

    You are young so here are some steps you need to follow:

    1. Get rid of all insurance payments you are paying your fund. You are young and just dont need it.
    2. Change your mix from 100% cash to an 'aggressive' mix, as again, you are young and therefore time is on your side.
    3. Australian Super is fine as it is an Industry Fund….never switch to a retail fund. They only care about making money for shareholders, NOT your retirement.
    4. When you change jobs, keep the same fund and dont open a 2nd, 3rd or 4th fund. This has screwed many people over the years.
  • rektrading on 26/08/2021 - 13:54

    OP, make sure you subtract -3.8% from the gross rate of return.

  • Peck on 26/08/2021 - 15:06

    Australian Super is closing its property option. Maybe it has become too risky!
    https://www.australiansuper.com/campaigns/propertyinfo

  • rektrading on 27/08/2021 - 14:58

    https://ibb.co/JR97xf4
    https://ibb.co/qgf3vZ0

    9.05% 10Y is a terrible ROI even before factoring in the reduced purchasing power over 10Y.

    Value of $10,000 from 2011 to 2021
    $10,000 in 2011 is equivalent in purchasing power to about $11,873.11 today, an increase of $1,873.11 over 10 years. The dollar had an average inflation rate of 1.73% per year between 2011 and today, producing a cumulative price increase of 18.73%.

    This means that today's prices are 1.19 times higher than average prices since 2011, according to the Bureau of Statistics consumer price index. A dollar today only buys 84.22% of what it could buy back then.

    The 2011 inflation rate was 3.33%. The current year-over-year inflation rate (2020 to 2021) is now 1.55%1. If this number holds, $10,000 today will be equivalent in buying power to $10,155.04 next year.
    https://www.in2013dollars.com/australia/inflation/2011?amoun…

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