Tania’s super

In an earlier column I outlined the problems of the cognitively challenged ‘Tania’. Tania is not cognitively challenged because she’s stupid. She is cognitively challenged because impossible demands are made on her cognitive faculties. That’s what I argued with regard to the requirement that she choose where to put her super – not the kind of choice she’s comfortable with.

But, courtesy of Adam Smith’s idea of the division of labour, help is at hand. Some Troppodillians would be cognitively challenged to do what Tania does – teach primary school kids – but not cognitively challenged to choose a great super fund. So I’m hoping they’ll help Tania out in comments below. This is how Tania responded to the column in an email to me.

I am enjoying my continued notoriety, despite my obvious cognitive inefficiencies!

Actually I have been thinking about asking you about my Super, but am wary of encroaching upon your precious time. But now that you mention it, I am currently with ING, so no doubt paying fees etc. My portfolio is mostly OZ shares, from memory. Not much money there now I bet. I have spent a small amount of time researching other options and came across Super orgs that are for members only. But would I need to be a fire-fighter to belong to its Super fund?

Where would YOU put your Super?

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rog
rog
13 years ago

Term deposit with the Arab Bank – more ASX grief to come

Patrick
Patrick(@patrick)
13 years ago

I rolled all my super into my very first account – with hostplus, dating back to my part-time waiter/kitchenhand days.

Haven’t impressed me that much but I don’t know if anyone else would have either.

I don’t think there are very many real ‘members-only’ super funds these days. Hostplus is an example, you don’t have to be connected to hospitality to sign up.

pedro
pedro
13 years ago

Sunsuper is an industry fund that I think anyone can join. Their ads claim they are doing well relative to the industry average.

derrida derider
derrida derider
13 years ago

Most of the industry funds are open to anybody now. Just go to their websites.

Many of the big ones offer a choice of accounts within them with different investment strategies. Really the only rules you need are:

– choose a large fund that is run by boring people (that is, not-greedy nerds). Excited hype in the prospectus is not a good sign. Neither is a big advertising budget.

– choose a growth-oriented account if you’re young (the volatility washes out over time and average returns tend to be larger) and a cash-heavy one if you’re near retirement (you haven’t got enough time for volatility to wash out). If you’re intermediate between these, choose a balanced account.

The rest is detail that won’t yield enough extra return to justify the stress of the cognitive challenge.

SJ
SJ
13 years ago

“Perhaps there could be some explicit agreements between generations – risk sharing by the younger generation to reimburse their oldies if their aggressive strategies go off the rails?”

That’d be something like the US social security, wouldn’t it? I’d have no problems with that.

SJ
SJ
13 years ago

I should add that I have the qualifications to be an investment advisor, but I never worked as one, and never would choose to do so.

I manage my own investments, of course, and that’s working out OK, and I somehow got suckered into advising my mother-in-law, but what I tell everyone else in the family is that they should get independent advice, then check back with me so that I can point out any potential problems with the advice, and steer them away from obviously bad deals.

That way, I can avoid the blame problems. You should never, ever, give investment advice to people who you want to still talk to you in ten years time.

derrida derider
derrida derider
13 years ago

Fair enough Nic about the generic nature of my comment – but I wouldn’t be game to be any more specific because of the effect SJ just noted. Anyway as they say in the racing game, those who know don’t say and those who say don’t know (you can count me in the latter group, BTW).

I’m not sure I agree about the pre-retirement volatility. You have to draw an income stream in retirement to support consumption, and volatility in consumption is far more painful than volatility in assets. So you’re gonna be looking at time of retirement for something that guarantees access to a steady income. But the value of that income stream in turn depends on the current (not future) value of the assets at retirement, so if you are at all risk averse (in the technical, not popular, sense) you need to reduce volatility in that asset value as you approach that retirement date.

It oughtta be possible to formally model this and see whose intuition is right – do you know anyone who’s done it?

Damian Jeffree
Damian Jeffree(@damian-jeffree)
13 years ago

Sorry for delayed reply, and also because I do not have any really helpful tips for Tania.

I was in conversation with a Quant PM mate of mine trying to come up with even a theoretically helpful answer (let alone the much more difficult practical answer). But aside from deploring the lack of truly uncorrelated asset classes and lamenting the difficulties of currency exposure we did not come up with much to help Tania.

My own super is currently in a conservative fund lots of offshore, fixed interest etc, but even that lost 4% in the last year and more like 40% in real (US) dollars. A timely switch from domestic small caps late last year makes that a OK result over 2 years, but nothing to write home about, particularly in those real $s.

I do suspect that switching super around between agressive, conservative and somewhere in between based on market conditions may be part of the answer, before even considering asset class distribution. Timing is everything though and knowledge of those markets is difficult for those not in the industry. Back to the original problem…