Beware self-managed super property buys
YOUR ADVICE
DO you have a view about purchasing investment property through a Self Managed Superannuation Fund?
I am not in favour of it. My view is that you maximise profits when buying property by borrowing as much as your budget can afford. Therefore, my recommendation is to keep your super fund for interest bearing accounts and shares and buy property outside the superannuation environment.
I AM fully retired, 10 years younger than my husband, and am two years off reaching the preservation age for accessing my super.
I understand that my superannuation account is not considered by Centrelink until I reach the pension-eligible age. Will the withdrawals I make in the intervening years count as income and if yes, will they affect my husband’s eligibility?
Lump sum withdrawals from super are not regarded as income for Centrelink purposes but once the money leaves your super fund and is placed in your bank account it will start to be counted as an asset and be subject to deeming for income test purposes.
I READ with interest your article on investing internationally. The difficulty is that funds specialising in international shares don’t pay predictable fully franked dividends and the returns are not predictable from a tax planning point of view.
Returns are also highly volatile, so that one fund may do very well one year, but poorly the year after.
I have units in the Vanguard International Index Share Fund (Hedged) and over 10 years the returns (capital growth) have been very modest – and there are no significant dividends/ distributions.
Personally, I prefer to invest in ASX listed companies which run the managed funds such as Magellan Financial Group (MFG), and Platinum Asset Management (PTM).
They at least pay fully franked dividends (with the obvious tax benefits) at a predictable time on a biannual basis.
That is particularly important for self-funded retirees such as myself.
Every investment has advantages as well as disadvantages. Just, keep in mind that the Australian sharemarket is just 2 per cent of world markets and by restricting yourself to Australia you are not taking advantage of what is available in the other 98 per cent. This is why international exposure should be an essential component of any balanced portfolio.
The challenge for investors is to work out which shares they could choose from the vast range that is available in that 98 per cent — this leaves most of them with a choice of an international index fund, or a managed fund which picks stocks. As you have pointed out, the index funds in most cases have not done as well as many of the actively managed international funds.
Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au