How much do you know about the super industry and how do you know your fund is doing the best for you? We ask that question ourselves and we dig in to find the answers. Did you know that you can use your super to pay off outstanding mortgages when you retire? The ultimate goal is to build wealth, right?
First, we look at the industry as a whole, as you might already know, the industry is consisted of different types of funds, which will be examined later.
Here are the snapshot of what we find.
Another graph showing the same industry average returns
How does the industry perform as a whole on a yearly basis? We were able to obtain the most recent quarterly data, publicly available, and here is the chart, showing the last 2 years.
Now if we look at what they invest in, for the last few years, there is little change historically. Here are the two charts that are showing the asset allocation of 3 years ago vs most recent quarter.
By looking at their asset allocation, you can see there is little change, i.e. how much value added have they make to your super, given the economy is growing in recent years.
And if we look at their biggest asset allocation (Equity), we can see there is no/or little change. This is not taking into account properties, commodities, etc.
And if we look at their Defensive allocation, we found the same trend, with little change over the years. The question we want to ask is how much risk are you willing to take, does my super fund reflect that? and should they be rebalance every cycle?
Now let’s look at different types of super funds that current operate in Australia, and how well does it perform over the last 2 years.
What does it mean with all these trends? It means that choosing the right fund is hard, because they offer no incentives. Einstein once said, “Compounding is the 8th wonder of the world.”
Here is a quick example of the power of compounding (based on FV of Annuity Formula).
Let say you are investing $400 per month into a fund, that performs better than its peers of 2% per year, what is the net different after 20 years? Our calculation of a fund that performs 5% and a fund performs 7% shows that instead of earning $208,370, you are only earning $164,413, a difference of $43,957.
This graph is showing compounding monthly at 5% pa.
And this graph is showing compounding monthly at 7% pa.
After all these revelations, the next question is how do you know which fund is best for you, or how do you know that you are not paying too much fees but not getting the right results? What if you want to take more control of your super?
If you are not sure where to start email us at info@infinitezephyr.com or 0434 125 921 and one of our team will get back to you.
Disclaimer: This is for illustration purpose only. The information is publicly available* and we extract from those sources. Any information in this example does not constitute or formulate any investment advice. We do not take into your account your personal financial circumstances, objectives or needs, and this should be viewed as General advice/Information only. You should, before acting on the advice, consider the appropriateness of the advice.
*Data used in the above illustration was sourced from: https://www.apra.gov.au/ on 18th Feb 2020. Errors and omissions excepted.
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