Money Australia - August 2019

ALEX DUNNIN

EXECUTIVE DIRECTOR, RESEARCH

AND COMPLIANCE AT RAINMAKER

INFORMATION

A

ustraliansarespoiltforchoicewhenit

comesto investingtheirsuperannuation,

withmorethan 200 fundsandmorethan

80,000investmentoptionsallcompetingforyour

hard-earnedmoney.Butchoiceis onlya good

thingif thosechoicesareworthy.Unfortunately,

notenoughare.

ResearchbyRainmaker,publisherof thesuper-

annuationcomparisonserviceSelectingSuper

(andMoney), showsthebestfundsroutinely

achievereturnsabouttwicethoseofthelowest

performers.Thisperformancegaphappensregard-

lessof thetimeperiod,themarketsegmentorthe

assetclassyou’reinvestinginto.

Asa result,justbeinginsuperannuationisn’t

enough– youhavetobeintherightfund.Being

inthewrongfund– onethatchronicallyunder-

performs– couldcostyou$500,000in lostsavings

bythetimeyouretire.Thisopportunitycosthas

nothingtodowiththefeesyoupayorthecon-

tributionsyouplaceinyourfund;it’spurelythe

long-runimpactofcompoundintereston

thereturns.

Mostofuswillbeinsuperfromtheageof 20

untilretirementinourlate60sandwillprobably

staywiththesamefundwellintoour90swhile

it paysusa retirementincomestream.Thiscould

seeusinsuperforsixorsevendecades.

Investingoverthistimeframeshouldgiveus

theconfidenceto investin thetypesof assetsmost

likelyto generatelong-termcapitalgrowth,which

is whatwemea nbyg row t ha ssets.T hesei nclude

Australianandglobalshares,directlyheldprop-

ertyandrealestateinvestmenttrusts,private

equity,venturecapitalandperhapsevenselected

hedgefunds.

Superfundsthatinvestthiswayusuallyhold

morethanhalftheirinvestmentsinthesetypes

ofassets.If theyholdmorethan75%they are

calledgrowthfunds;if theyholdbetween50%

and70%theyarecalledbalancedfunds.Some

superfundsmayputmorethan90%of theirassets

intogrowthassets,withthesefundsbeingcalled

highgrowth.

Wheninvestingyoursuperannuationover a

longtime,at facevalueit makessensetochoose

a growthfundbecauseoverthepastdecadethey

haveachievedaveragereturnsof 8.7%pacompared

w it h7.6%pabyba la ncedf u nds.T h is1%d i fference

couldboostyoursupersavingsbyabout33% by

thetimeyouretire.

Thesubtletyis thatyouneedtobesureyour

superfundis a consistentlystrong,oratleast

above-average,performer.Justbecauseyourfund

investsa lotofyoursavingsintogrowthassets

doesn’tmeanyou’llgettheinvestmentreturns

youareexpecting.

Nevertheless,a smartlyrungrowthportfolio,

managedbyinvestmentexpertswithproventrack

records,is a greatwaytoinvestyoursuperannu-

ationoverthelonghaul.Justmakesureyoumon-

itoritsreturnsat leastannually,thatyoudon’t pay

morefeesthanyouhavetoandthatyoutrust the

organisationrunningthefund.

COVER STORY

▲ALEX DUNNIN^ SUPERANNUATION

WHERE I WOULD

INVEST $10k

It’s not a lifechanger but

a windfall of $10,000 is

a nice starter package.

High on my list would be

giving my 19-year-old-son

a kickstart. He could set up an

account with, say, an exchange

traded fund. He’s studying Asian

and international security and

this would give him a financial

taste of the region that is our

backyard and where he’ll most

likely make his career.

After all, the best thing we

can do for young people is to

help them appreciate how

money moves through their

lives. Teaching them how to

take financial control is one

of the best life lessons we

can impart.

A $10,000 windfall could

also be the perfect opportunity

to clean up your finances.

Despite record low interest

rates, credit cards can still

charge up to 20% interest,

about three times what the ASX

earned last financial year. Blow-

ing away some niggling card

debt might be just the thing.

While you're at it, check

where else you can make some

easy saves in, say, home energy

bills, super fund and life insur-

ance or mobile phone deals.

Most of us probably spend

$5000 a year on these regular

bills, so finetuning them is

easy, low-hanging fruit.

Where should my super be

invested – in balanced or

growth portfolios?