Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, 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 pete@allenwargent.com

Sunday, 25 March 2012

Should we really care about super fees of 1-2%?

I read some years ago in a few US books that mutual fund managers take around 60% of your money - and thought it was the most ridiculous thing I'd ever heard.


More recently, I've come to understand what they meant.


With fund management fees averaging out at 1-2% in Australia, this can make a massive difference to your ability to grow your super balance.


Seek out funds with management fees of around 0.5% p.a. if you can.  They do exist, and there is no compelling evidence that a higher fee equates to a better fund performance.


Just be wary of whether your fund charges an exit fee (some just charge an admin fee, others a cheeky 2-5% of your balance - a con really, but it was there in the small print when you signed up, so...).


Check out this table as to what you might be getting charged as a fee:



Balance of fund
Fees at 1%
Fees at 2%
50,000
500
1,000
100,000
1,000
2,000
150,000
1,500
3,000
200,000
2,000
4,000
250,000
2,500
5,000
300,000
3,000
6,000
500,000
5,000
10,000
1,000,000
10,000
20,000


And now check out the difference 2% might make to a $100,000 balance over 45 years (no extra contributions included here, for simplicity).



Year
6% compounding return
8% compounding return
0
100,000
100,000
10
179,084
215,892
20
320,713
466,095
30
574,349
1,006,266
40
1,028,572
2,172,452
45
1,376,461
3,192,045

It is quite clear that while the effects of a 2% management fee only appear to make a marginal difference in the early years of building a retirement lump sum, over a working lifetime the potential difference is absolutely staggering. 

It's the money that is NOT allowed to compound its growth that makes all the difference.

If you have a balance that runs in to six figures, you might like to consider managing your own super (though you will have to pay auditor and tax compliance fees).