Balance of fund
Fees at 1%
Fees at 2%
Pete Wargent blogspot
Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.
"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.
"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.
"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.
"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.
Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email email@example.com
Friday, 30 December 2011
At what point does self-managing your super become viable?
With the market down the best part of 15% for the year it is unsurprising that more Aussies than ever before are looking to self-manage their superannuation in 2012.
There are 2 reasons for doing setting up a self-managed fund (SMSF):
1) Cost – super fund managers charge an average of 1-2% of your fund balance as a management fee. Fund managers also tend to turn over stocks at very high rate in order to chase short term results (funds are assessed quarterly in the financial press which doesn’t make a lot of sense for long term investment) – this generates transaction costs and capital gains taxes;
2) Control – by managing your super you are in control of your own destiny – a fund manager may try to optimise returns for you but by definition cannot be align his goals with those of every member of the fund
More than 90% of managed funds fail to outperform the stock market index, so if you want to improve your returns your best chance is to self-manage and lose the inefficiency of the fund management industry.
The flaw in the super system
There are several flaws in the super system but the biggest is this:
The higher your balance becomes the more the fund manager will charge you per annum.
Ouch. This is why your super fund never beats the index. Even if the headline returns look OK, take out the insurance fees, capital gains taxes and the fees siphoned off by the fund managers (in losing years as well as winning ones) and there is not much left for your pension.
The difference that 2% per annum (an annual return of say 6% instead of 8%) can make to your retirement is simply staggering. Your balance could be less than HALF of what it would be with an 8% return. Amazing but true. And that’s YOUR retirement money that’s being siphoned off.
One option is to look for a low-cost fund – there are perfectly decent funds out there that only charge 0.5% or lower. A higher fee does not by any means guarantee a better outcome.
One problem with this may be entry and exit fees which can make shifting between funds inefficient.
These vary depending on the complexity of your fund and which advisers you use.
The set-up costs might be anywhere from a thousand dollars to several thousand depending on the structure chosen – and the annual tax compliance, administrative and audit fees might be in the same ball park too (per annum).
There is also a cost to your time.
Managing your pension must be done responsibly and you must comply with the ATO, SIS Act (1993) and other regulations (failure to do so results in a SMSF being taxed at the full marginal rate instead of the concessionary rate and may also result in fines – in other words if there is a chance you won’t comply for some reason, don’t self-manage).
There is no stipulated minimum balance but I would say you would want at least a balance of $50,000 before self-managing to invest in shares or $75,000 if you were going to invest in property.
With lower balances the administrative and other costs may outweigh the benefits.
One option is to pool your balance with your spouse (or a friend, or other family member) to make your fund more viable for self-management.
If you are going to do so, think carefully about it first, of course!
Australia won the First Test after 4 brilliant days of cricket at the MCG.
Officially it’s 31 degrees today but after East Timor and Darwin frankly everywhere feels cold, even Perth.
Heading down for some lunch in St. Kilda and maybe a walk along the famous promenade with one of our Timor aid buddies who is spending her Xmas in Melbourne.
Forecast for NYE and the fireworks is forty degrees. Surely that must be a typo, I thought, but apparently not?!