What I’m about to share with you could pos­si­bly be the big­gest change to su­per­an­nu­a­tion since I wrote my book, The Bare­foot In­vestor: The Only Money Guide You’ll Ever Need, a few years ago.

The Sunday Telegraph (Sydney) - - WORLD -

But first, a cute anal­ogy to ex­plain how Aussie su­per works:

Re­tail su­per funds, those owned by the banks and AMP, are the fi­nan­cial equiv­a­lent of Face­book. We all signed up for them years ago be­fore we had a clue, then grad­u­ally worked out that they made their money by dig­i­tally shag­ging us — so they’re now well and truly on the nose.

In­dus­try funds, on the other hand, are like In­sta­gram: they’re just so hot right now. Post the Royal Com­mis­sion, bil­lions of dol­lars are flow­ing their way as peo­ple switch out of ex­pen­sive re­tail funds.

The prob­lem is that, when it comes to fees, all su­per funds are about as gen­uine as an In­sta­gram selfie: #it’s-not-all-about-fees-bare­foot! And, as a re­sult, Aus­tralia has some of the high­est in­vest­ment fees in the world.

Yet this week the game changed: the world’s largest in­dex fund man­ager, Van­guard, an­nounced its in­ten­tion to set up its own su­per fund Down Un­der.

Why is that such a big deal? Be­cause Van­guard is known as the ‘Ama­zon of fi­nance’. The in­dex fund pi­o­neer is no pouty In­sta­gram in­flu­encer: it has a his­tory of ag­gres­sively, and re­lent­lessly, low­er­ing its fees. (Case in point: over the past decade alone, Van­guard Aus­tralia has cut its fees more than 25 times.) Bot­tom line?

It’s high time for a su­per rev­o­lu­tion, and my hope is that Van­guard helps de­liver it. I’ll be watch­ing closely to see what they come up with, and I’ll let you know what I think when they do.

Tread Your Own Path!

I’M ON LITHIUM

Hi Scott,

My wife and I re­ceived $370,000 from the sale of our house, which I de­cided to in­vest into an Aus­tralian lithium pro­ducer. But over the past six months the share price has halved, leav­ing me (on pa­per at least) with a very dis­tress­ing loss. My ques­tion is: do I let this ride un­til things pick up, or am I in a sit­u­a­tion that could get even worse?

James

Hi James,

This could get much worse — es­pe­cially if you haven’t told your wife about the share price plunge yet.

She will likely process your con­fes­sion as fol­lows: you have taken her se­cu­rity — lit­er­ally the roof over her head — and gam­bled it away at the casino.

And you know what? She’s right. Dude! What the hell were you think­ing? Are you on lithium?

A quick google shows me that it’s been a wild ride for lithium stocks lately. Two head­lines from the same publi­ca­tion, just four months apart, tell the story:

Novem­ber 2018: “Why I think these lithium min­ers of­fer great growth po­ten­tial for in­vestors.”

March 2019: “Have lithium stocks hit rock bot­tom?”

I have three (bor­ing) rules when it comes to in­vest­ing:

First, I don’t like in­vest­ing in spec­u­la­tive com­pa­nies that don’t have a track record of mak­ing money.

Sec­ond, I don’t like in­vest­ing more than 5 per cent of my port­fo­lio in any one stock.

Third, I would never, ever in­vest money I thought I might need within the next 10 years (say, to buy an­other house) into the stock mar­ket. While good in the long term, shares are just too risky in the short term.

I’m afraid you’ve bro­ken all three of these rules. And, if you’re tempted to keep play­ing at the casino, re­mem­ber that things can al­ways get worse from here. My ad­vice is to stop lis­ten­ing to in­vest­ment gu­rus who can’t pre­dict the fu­ture, and start lis­ten­ing to some­one who has a real in­ter­est in your fu­ture: your wife. Sit down and make a plan to­gether.

MY SU­PER CRAPPY BOSS

Hi Scott,

I feel like ev­ery­body learns to check their su­per the hard way — by not be­ing paid it at some point thanks to a su­per crappy boss. I am a 22year-old uni stu­dent and have mostly had hos­pi­tal­ity jobs while study­ing.

I have in fact done two years of hard work with no su­per, thanks to the slimy owner of one of those neon-coloured hole-in-the-wall dough­nut shops (that In­sta­gram is so ob­sessed with). I con­tacted the ATO, I con­tacted the Fair Work Om­buds­man, and I even main­tained con­tact with the boss him­self af­ter I rage-quit. In the end I lost my time as well as my money.

The com­pany just ‘phoenixed’ (went bank­rupt, started a new com­pany, then ‘bought’ the res­tau­rant from the old com­pany free of su­per debt). Scott, af­ter you have got banks out of schools, the next thing you should throw your weight be­hind is stronger pun­ish­ments for su­per theft.

Kelly

Hi Kelly,

Since last week’s col­umn, I’ve been in­un­dated by peo­ple telling me sim­i­lar sto­ries to yours, and a lot of them are young peo­ple work­ing in hos­pi­tal­ity. It seems there re­ally are a lot of crappy bosses out there.

To add some salt to your dough­nut, I should point out that you didn’t just lose two grand.

From age 22, with com­pound­ing over your life­time, that money would have grown into tens of thou­sands of dol­lars! And that’s why this theft — and that’s what it is — needs to be stamped out. I also don’t un­der­stand why the govern­ment is of­fer­ing a no-ques­tions-asked amnesty on bosses who haven’t paid su­per. I guess some em­ploy­ees might re­ceive a bit of what they’re owed, but I reckon it sends the wrong mes­sage.

The peo­ple I feel for — apart from you, of course — are the hon­est busi­ness own­ers who are do­ing the right thing, pay­ing their staff the cor­rect wages and su­per, yet are com­pet­ing with the likes of

Ge­orge Calom­baris.

Now that’s a dough­nut.

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