Best In Show Superannuation Funds, And What I Do
On 10 January 2019 the federal government released the Productivity Commission’s report “Superannuation: Accessing Efficiency and Competitiveness”.
It has attracted significant media attention, particularly the proposal to compile a panel of experts who would put forward a listing of superannuation funds that were the ‘best in show’ and be part of a preferred listing of choices for people to choose their default fund.
Included on the panel of experts, it was suggested the head of the Reserve Bank. I have no doubt the Reserve Bank Governor is an expert, particularly with regard to monetary policy, but I have no idea what he knows about superannuation. Or how he might be placed in determining an appropriate superannuation fund for millions of Australians inadvertently relying upon his advice.
There would be heads from other “respected, independent government agencies”, whatever that means.
One wonders how the best in fund candidates would be determined. Would the funds that have had the best performance in the last 12 months make the grade? Or would longer term performance, over 5 or 7 years be more appropriate?
Is any of this appropriate, if much of the money invested as a consequence are invested for 3 or 4 decades, or more, to fund the future retirement of today’s new entrants to the workforce? A high growth fund invested in quality assets may have a terrible and volatile performance over 12 months, or 5 years, yet a spectacular result over 40 years.
Personally, what do I do?
Since my retirement is still 20+ years away, I have kept with my long term retail superannuation fund, which probably has one of the highest fees, an issue much maligned by the media and addressed in the Productivity Commission report.
Why? Since my superannuation monies have the longest investment horizon of any of my investments, I am happy (and can sleep at night) with the most volatile, risky, and high growth investment options I can find. Whilst I do not recommend it to anyone (and I cannot), I am happy to be invested not just 100% in Australian shares, but on a geared basis. So when the market goes down, or up, then generally my superannuation fund goes down, or up, much more!
Yes, it is a wild ride, but I do not check it every day, and do not need it for another 20 years or more.
And hopefully, the value in 20 years is a lot higher than if I instead chose a cheap, low risk fund option today.
What do you do?
Would you be happy with one of the Best in Show Funds by the panel idea floated by the Productivity Commission, or are you going to research this (or obtain advice from a professional, suitable financial advisor who an provide appropriate recommendations in your best interests), and make a different decision for yourself?
What will your retirement look like? Are you going to be a Superannuation Millionaire?