<rant>

Superannuation, yet again.

1. Your super fund is not guaranteed. I mean the actual dollars if the super fund collapses, like Babcock & Brown. This is not unlikely.

2. You are forced to give the fund money and they charge you for this transaction.

3. The aging population issue that superannuation is supposed to be anticipating is actually being made worse because we have even less disposable income for children. The problem is feeding itself.

4. The government doesn't guarantee your super because ...well I wouldn't either.

</rant>

Back to the Saturday morning cartoons.

Less complaining, more action, join the movement:

http://thezeitgeistmovement.com/home.html

evlPanda said...

<rant>

1. Your super fund is not guaranteed. I mean the actual dollars if the super fund collapses, like Babcock & Brown. This is not unlikely.

Funds collapsing happens because of leveraging - ie borrowing money to invest, which increases both returns (if the market rises) and losses (if it falls)

By law super funds are not permitted to borrow money. Ie they cannot leverage

The only way the fund can completely collapse is if every single investment they make ceases to exist. Two possible ways:
1. all the eggs in one basket (usu self managed super), in which case they are idiots
2. Complete implosion of all finances, such that not one single company/bank/anything is left standing - think nuclear warfare or something. In which case how useful is a government guarantee. They wouldn't have any money either

I think your fund is safe from collapse.

Yeah, the funds have lost money. But the stock market is at the same level as in 2004. Think about it. If the stock market had not made any money at all for 5 years, people wouldn't be complaining like this. The only difference is the past five years of your super investment has bought stock when the market was higher, and then dropped. The losses are then the difference in the purchase price and current price.

If you are about to retire, this is a small proportion of your super. If you are not, you'll well and truly make it back before then

I am SO not worried about all of this.

And super is far and away the best investment most people can make with their money. It's taxed much less than your income. Think about it - a guaranteed 10% return (or whatever depending on your tax rates) immediately. Particularly if you put the money into your not-working spouse's super - then it is pretax, plus the government gives additional funds. For me, I made a 30% return overnight by doing that.

I think the small losses on my last 5 years of super contributions are worth that

No-one EVER complains about super when the funds are making money

Super at the moment has been like sailing a wave board when the wind drops - that awkward sinking feeling.

But the longer you hang out there, the wind picks back up and you are off. If it looks dodgy and likely to happen again, you play it safe and go back to shore.

The super market is like this too, it goes in cycles like El Nino.
Historically the super cycles (closely related to the market cycles) is around 7 years.
What you have in there in your super will bounce back given time. I still have mine in high risk growth and diversified between O/S and Aust shares. At the moment the O/S are doing better. If you were say to retire before the crash, the cash option would be the fairer bet, but it too was affected.
Best talk to a financial adviser, but the Paul Clitheroe's and other monetary commentators all just say hang in there.

Also I just chip in a little myself to my employers fund, and its tax deductible as salary sacrifice, well worth doing, dont really notice the deduction if you do it right and builds nicely too.

evlPanda said...

But they can invest into company X that is heavily leveraged. Or they can invest into company X that invests heavily in Company Y that is heavily leveraged.

Interestingly they can also invest in CFDs. Even self-managed super funds can invest in CFDs.
www.ato.gov.au/law/view/document?docid=AID/AID200756/00001

True. But YOUR losses are limited to the total value of the investment in that company. Ie the shares in that company, (or CFD or whatever) are limited to a small proprtion of your total fund value. In a well run fund that should be only a small proportion of the total