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High growth, or balaned fund

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Chris.W, 16th Jan, 2008.

  1. Chris.W

    Chris.W Member

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    Hi my Super fund is in high growth at the moment and losing money quickly. Should I leave it in high growth and wait out, or change to balanced.
    I am 9 years fm retirement.
    Thanks
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Chris,

    How long til you reach age 55?

    Cheers,

    Dan
     
  3. Chris.W

    Chris.W Member

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    Hi Dan, it is 41/2 years before I reach 55. This was going to be my original retirement/stop full time work age, but now I may have to work longer to recover the losses.
    I told my financial planner I will now have to work for 9 more years, but isn't this classed as a long enough term to leave it in high growth, to recover and in 3-5 years time go to a more stable balanced fund??
     
  4. AsxBroker

    AsxBroker Well-Known Member

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    Hi Chris,

    You've got another 35 years of investing (on average life expectancy for a male).

    Where do you think the share and property markets will be in 35 years time?

    Cheers,

    Dan

    PS While past performance is no guarantee of future returns the All Ordinaries started in January 1980 based on 500, today the 17th January 2008 closed at 5850.

    PSS Speak to your FPA registered Financial Planner before making an investment decision.
     
  5. Chris.W

    Chris.W Member

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    Thanks Dan. I have really panicked the last few weeks, as I have lost $10K for 4 weeks now. I saw my FP the other day and lost control of myself and blamed them for changing me to high growth. He made me do one of those silly questionnaires to see what type of investor I am. Of course I can't sleep at night when I lose money, but I am trying to get over it and focus on the long term. He then suggested I should be in the balanced - but if I have a long time frame, why not high growth. He would not answer me when I said "tell me why I should continue using you, when my other industry fund which is balanced has performed better for the last 4-5 years" He said you must compare apples with apples, my aguement was, no the bottom line is, who is making me more money you the FP or my industry fund Super.
    Also, to switch it will take 3 weeks for the paper work to go through, and yet with the industry fund, I do it over the internet and switches happen every Wednesday.
    I will be making a few more phone calls tomorrow and once the dust settles find a new FP, draw out my money and do a 50/50 split with an FP that I feel more comfortable with and my current industry fund.
     
  6. crc_error

    crc_error The Rule of 72

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    you lost <only> $10k? lol.. don't mean to be rude, but there are people who are losing ALOT more than you here.

    Sharemarkets don't go up in a straight line.

    If your happy with industry super funds who only return 5-6% PA, then stick with them.. if your hoping for a better longer term result, stick with high growth which will mean higher volatility.

    Your view on such fund should be 5 years plus, so to look at it weekly and say 'I'm losing money each week' is stupid. Your not losing anything until you sell. Do you re-value your house each week? So why do it with shares.

    I very much doubt stock price will be the same or less than today than in 5 years time.

    To blame your financial planner for problems in the US is also not necessary.. No one can predict the future. However he would have placed you in the correct fund for the time frame you have before retirement.
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    May I kindly suggest that you take a step back and assess the situation carefully before you go selling your existing investments right now ?

    The markets are down a lot - and they may go down further still in the short term, but unless selling now is part of your strategy (or a necessity), I wouldn't be rushing to realise losses at this point - give it a couple of months.

    Definitely discuss this all with your (new?) advisor before you make any decisions ... and most importantly - ask them "why" they recommend the things they do. Perhaps run their ideas by us (if you are comfortable doing so) for a second opinion before making any decisions (although at the end of the day you have to trust your advisor - not us!).

    Just about everything on the markets is down right now ... there are very few funds (other than cash) which are not showing losses over the past 3 months ... so it's not as though only your investments are doing badly (although some may be doing worse than others).
     
    Last edited: 18th Jan, 2008
  8. MattR

    MattR Well-Known Member

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    As long as your not in pension phase - what's the problem!
     
  9. AsxBroker

    AsxBroker Well-Known Member

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    Hi Chris,

    I'm not quite sure how much $10k is in your whole situation, percentages are better to use.

    One of my client's was freaking out that she had lost 2.2%, another client was cool as a cucumber and he had lost 10%. The main difference was that he understood that the markets will go back up (at some stage).

    I am amazed that your planner changes you to high growth and then afterwards does a risk profile questionnaire with you...What does your earlier Statement of Advice say?

    If you really want to compare your Industry Fund ring them up after the end of January and ask them what their January Interim Crediting Rate is. Industry funds are notorious for using "smoothing" techniques. They'll also never call you to change funds or do other things. Your also paying for Capital Gains Tax by using an Industry Fund as it is built-in to the crediting rates, if your in a wrap account you can move the funds across and sell in pension phase for no CGT liability.

    It sounds like your adviser is a little unsure about why you should continue to use their services. Maybe, this is because they are unexperienced and cannot verbally justify how they add value. While I'm just shy of 30, since 19 I've been working in stockbroking/financial planning, also I've done courses tilted towards Applied Finance not just a Dip in FS (FP). Your adviser may while being a reasonable age, eg, 50 they may have not been in finance before hence struggle with articulating how they add value to your situation.

    I don't know who your FP works for but 3 weeks? WTF? I do it online and client's have the funds the next day...

    I am so intrigued to find out who your FP works for...(then maybe laugh and then shake my head)...

    I don't think any fund managers are making money at the moment, remember that Industry Funds use the same fund managers (Investment managers - AustralianSuper as an example), lawyers, accountant, custodians, stockbrokers, etc, and all the professionals want to get paid (just like financial planners).

    I'd say, even better if he is in pension phase as income from fully franked shares is fully rebated! Woohoo

    Chris, no Investment/Fund Manager is making money for clients at the moment, everybody is feeling the pain in some way. Ie, super or investments outside of super.

    Like Sim said, look at the full picture.

    Cheers,

    Dan

    PS Before making an investment decision speak to an FPA registered Financial Planner.
     
  10. Chris.W

    Chris.W Member

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    Thanks everyone for your input. Just to get the figures right, my typing errors - it has been losing $10K per week for the last 4-5 weeks i.e a total of $50,000. It has dropped from $297k to $255, I don't know how to work out the percentage about 17% isn't it? Today I rang and spoke with the original advisor who changed my portfolio to high growth last year. He explained his reasons why etc and explained the market to me, it made great sense to me at the time, I would not know how to repeat what he said though, but I am now more happy and will just hold on and wait out for it to correct and smile at my long term growht. The FP I spoke to today, was very nice and did explain that the other new FP I had probably did not know how to explain it to me.
    I then was very nice and rang the other FP back and explained that I now understood it more and I was quite happy to continue in the high growth.

    I should assume there are a lot more clients like me out there that don't know much about shares/Super etc, but the FP should know how to deal with an aggressive female client, ie calm me down, explain it all in easy terms and assist me to understand the markets so I then will feel more confident to inject more money. Yesterday I was going to take out my personal contributions and buy another property.
    Dan - my other industry Super is Australian Super, and for the last 3-4 years they have always performed about 2-3% better in their balanced fund.
    Also the FP really did not know how to speak to me, and gave me that stupid questionnaire, I told him it was crap and I wanted him to convince me why I should stay with him. If FPs want to use the questionnaire, by all means do and if it comes up that the client is a conversative investor, try and explain to the client all about the market and how if they did take more risk they would make more money, lose more money, but long term they will be Ok than hiding in their term deposits. I even asked him to recommend a simple book for me to read to understand it, and he said go on the ASX site. I am sick of looking at sites. I want to buy a decent book to go the sleep with it and dream of making money in the share market now.
    Again, thanks Dan, I will try and PM you to tell you the name of the financial svcs I currently use.
     
  11. samaka

    samaka Well-Known Member

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  12. Billv

    Billv Getting there

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    ChrisW,

    IMHO changing from high risk to balanced won't help you much
    as both funds are bleeding heavily.

    If I were you I would change to capital guaranteed or cash fund and leave it there for at least 6 months.

    Are you with Aust super?
    Remember that it will take a couple of weeks to change to another super plan.
    Hopefully you will have a smart fund manager and you will recover some of the losses by then.

    I changed all of my super to the cash fund 6 months ago.
    It makes 5% or so but at least it won't go down.

    Good luck.
     
  13. crc_error

    crc_error The Rule of 72

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    BV, cash wont go up either.. so why invest? 5% PA is just break even. 3% is lost in inflation and the other 2% is lost in tax.. so your wasting your time having money in cash. Times like this are hard to digest, yes I'm also losing ALOT of money, however we need to understand the term we are investing for. ie 5 years. And times like this simply allow us to get more of our $$$.. Since super is a consistant regular investment, your new contributions are getting cheap units! when the market continues its upward trend, your patience will be rewarded.

    Problems come up when your geared highly and are forced to sell due to margin call and are paying out interest to hold something which is tempory going down in value.
     
  14. Billv

    Billv Getting there

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    CRC

    Moving over our super from plan A to B is simple, costs nothing (CGT free), makes some money and the most important, it will stop the bleeding.

    5% in a cash fund+(-5-20% potential loss if you do nothing)= 10-25% better off in the short term.

    The markets will recover eventually but there are so many dark clouds around atm.... :eek: so IMHO they won't recover anytime soon.

    When the stock markets recover we can always transfer our super back
    and see it grow...:)

    IMHO

    Cheers
     
  15. MJRoss

    MJRoss Member

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    A few quick comments:

    ASX Broker wrote: Hi Chris,

    You've got another 35 years of investing (on average life expectancy for a male).

    >> could not agree more ASX Broker. Many investors don't understand that retiring doesn't mean that you have to change your investor profile. In my view there is no point having money that won't be spent for the next 20-35 years sitting around in cash and fixed interest....unless a drop in the market is going to disturb your sleep.

    To Chris W:

    It is frustrating when a financial planner hands you a document with a few multiple choice questions, adds up the a's, b's, c's, d's and e's and concludes that because you want to retire comfortably, you're a high growth investor or stuffs you into some other pigeon hole.

    We use a questionnaire, but a discussion about risk must compliment the answers. One discussion we have with our clients is to ask them what the biggest drop in the market they could handle without them losing sleep. For a 'high growth' investor, you would need to be prepared for a maximum dorp of up to 35% (assuming some diversification). A 'growth investor' should handle a 20% drop, balanced investor: a 10-15% drop and so on. We show our clients the good returns on offer but then do a stomach test to see that they're prepared for the road ahead.

    Before making recommendations I ask my clients "If this drops by 20% the day after we invest it, are you going to call me up and call me lots of four letter words". If they say yes, we revise their risk profile. NB: those gearing should be prepared to stomach a 35% fall; if not, maybe you should rethink what you're doing.

    One other general comment:

    Be aware of 'crediting rates' published by some superannuation funds. During the good times, some superannuation funds throw on to the 'emergency pile' and don't reward members for the full risk that they are taking. During the bad times, they then dig into the emergency pile and give some of it to members, then boast about how they delivered positive returns whilst everyone else delivered negative returns (just what I've heard on the grape vine...).