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.
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
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?
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
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.
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
Now that’s a doughnut.