For most Australians picking individual stocks and maintaining stock market vigilance is not what they want to do, and quite honestly it is a full-time job more suited to interested retirees and other people that don’t work. People that are focused on making money, as opposed to looking after money they already made, should have better/more profitable lower risk things to do. If you are busy and focused on making money rather than investing it, then stepping onto the stock market battlefield, getting distracted from your metier, and taking extra risk, is probably not advisable.
Despite that almost everybody has Super and for those of you that want a peaceful life, undisturbed by share market volatility and requiring only marginal vigilance, you need do no more than stick with the structure that most of you already have. That is to say, leave your money tucked in one of the large superannuation or industry funds because there is nothing wrong with that, for a number of reasons:
- Leave it where it is. Leaving your money in a fund of some sort means that you’re not going to be gambling with it. Individuals being allowed access to their superannuation money is a very dangerous element of the superannuation legislation and rather goes against the principle of “putting money away” for retirement. We are all prone to gambling so it is better the majority of you don’t. Managing Super is best left to the unambitious, especially those of you that have dependents relying on your superannuation money. Losing your retirement funds under the camouflage of seemingly sophisticated yet wholly amateur investment is utterly irresponsible. If you are not engaged, interested, passionate and skilled, do yourself a favour, leave it where it is in some massive super fund.
- Be long term. You simply don’t make money gazing at your desk on a day by day basis, you have to focus on the horizon. Everybody knows it, but nobody does it. Successful investment is about consistent long-term returns in quality stocks, it is not about daily heroism. Individuals cannot help but try and turn up today’s rockets. Big funds don’t. Big funds are a heck of a lot less volatile and by definition, safer than allowing some rank amateur (you) manage it.
- Time and quality of life. Leaving investment up to somebody else leaves you free to do the one thing that you should all be doing, which is to invest in your career and/or business not in the markets. Spend an hour a day looking at an online broking account and that’s 250 hours a year you could have spent furthering your career, education or business. Investment in the markets is time-consuming. Investment in yourself is perpetual, stimulating and low risk, the lowest risk investment you can make. So focus on that, because, without a doubt, your chances of financial transformation are far higher than they are buying and selling stocks. Your career, brain, business are a low-risk long-term investment. The stock market, if you take it on, can be a high risk, short-term, series of investments, which don’t build your assets at all.
- Technology has moved on. Thanks to technology, most major super funds and industry funds now offer you the ability to do some mild stock market timing through the back end of your chosen fund’s website. You can now get off your Harley-Davidson on Route 66, walk into a bar, find North Korea has launched a ballistic missile, get your mobile phone out, go to your funds website and click “cash”. It is a fantastic tool and this is about as much market timing is any of you need. Clicking between cash or aggressive and back to cash as appropriate. If you’re lucky you will only have two press cash once a decade, but you should (1) know the website where your superannuation fund account is available (2) know your password to log in (3) know how to navigate to the page that allows you to click Cash, Conservative, Balanced or Aggressive and be able to switch between Cash and Aggressive (the ones in the middle are just a mix of the two and are there for compliance and marketing purposes).
- Which fund. The next question is “Which fund”. Well, they are much of a muchness at the big end. Whatever fund you are already in will probably do, as long as it is big and has a good website. The big funds are all vehicles to access the same average returns from all the markets (Balanced fund) or Equities (Equities fund). If you want to get picky then avoid an expensive platform, on that basis an industry fund, which does tend to be cheaper, is as good as any and they love you up as a Member rather than a customer. Any of the major super funds is absolutely fine whether it is an Industry fund or not, your results will be very similar.
- The downside. The downside of leaving your Super in one of the major super funds is that there is very little in the way of “Active” management going on. In fact, laughably, they are now leaving the asset allocation (the management of which used to be the main value-add of a very large superannuation fund manager) up to you! In the end you will be invested in thousands of equities and all the asset classes, and that dooms you to a very boring annual return that will be below the equity market in a good year and above it in a bad year. It will not grow rapidly, and it will not transform you financially. It will simply park the money somewhere you can’t touch it and where it will be at the whim of the financial market averages. That is a good thing most of the time because it means you aren’t gambling with it, losing it or wasting any time managing it. Just sometimes it is a bad thing. When a market crash comes along, or global financial crisis, or any of those other once-in-a-lifetime events that happen every ten years. That’s when you need to hit “cash”.
- When to hit “Cash” – There is no scientific way to “call the market”. I would simply go on your guts. If you start getting worried about whatever is going on in the world or the markets (getting disturbed about headlines like “Market has biggest drop in 2 years”) – press “Cash” in the back end of your superannuation fund’s website. You can always press “Buy” again the next day. You may only need to make a decision once a decade (if you are ahead of the eight ball (wealthy). The main game is to try and avoid a seismic time-wasting market drop. They happen every decade or so and in 1987 it took ten years to get back to the same level, and we are ten years after the GFC at the moment and have yet to recover the peak in 2007. Sometimes you simply have to sell the market or lose ten years. So keep a weather eye on the headlines and read a bit more if they are talking about trouble in stock market.
But the main point when it comes to amateur investment, is focus on building your brain, career and business and not your investments. Stock market is there for looking after money first, and making it second. If you are not prepared to get involved, treat it as a job, hobby or social outlet than leave it where it is, learn the password to the back end of your current fund and occasionally click cash when things look scary.