Superannuation Nest Egg Update (September YTD 2016)

the_goose_that_laid_the_golden_eggs_-_project_gutenberg_etext_19994The last time I blogged about my Superannuation fund  was in January (these are like a 401k or other Government mandated retirement account). Since then, three whole quarters have slipped by. As it is raining today (and a Saturday) I’m sat with a cup of coffee and the chance to review the fund, while I watch the rain fall against the window pain and the olive trees in my best friends courtyard.

In the 9 months to September 2016 my Superannuation returned 6.14%. The trailing 12 month performance is 12.01%. You can see a complete summary in the figures below:

screenshot-2016-10-08-14-42-41

These overall numbers are after tax and fees. I’m roughly 0.5 behind the average industry fund. My sense is that if my current strategy doesn’t work out over the next 3-4 years, I’ll have to change. I only recently diversified with an international fund, and this should have a good effect.

The chart below shows the comparative return (after fees) of my super fund vs. the median industry and retail fund. The ‘average return’ at the far right is a geometric mean (vs arithmetic) providing a more accurate average return. Interesting…

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The chart below shows the growth of $10,000AUD invested in the overall fund since inception and compared to the ASX300 total return index.

screenshot-2016-10-08-14-54-34

Until mid year, I didn’t realise the numbers I used for the benchmark were not total return numbers. I’d been tracking my Super performance against the return of the ASX300 index excluding its reinvested dividends. I’ve now fixed this. I also track performance relative to the average retail and industry (low cost) fund which is more meaningful (since the ASX300 is 100% Australian shares and not really representative of a retirement portfolio; seen below, I’m about 80% invested).

 

One important change for 2017 is that I’ll split my retirement contributions, 60% Super, 40% outside investments for an overall goal of saving 15% of my pre-tax income for retirement (this is effectively 9% of my pre-tax income to Super and 6% to other investments). Ultimately, if I manage my money well I’ll shift this ratio to 40-60, 20-80 or 0-100 (a guy can dream right!).

The chart below shows the asset allocation, being approx 54% Australian Shares, 24% International Shares and the remainder in Cash.

screenshot-2016-10-08-18-03-59

The fund is less invested than I would like, it could be pushed to 90% invested with 10% in cash. Although it would be more volatile, it would almost certainly generate a higher return over the longer term.

Also, I’m only invested in managed (mutual) funds and cash. With three primary funds, shown below.

screenshot-2016-10-08-18-03-51

Next year will be a more interesting and flexible year regarding my retirement funds, and I’m looking forward to growing enough to claim financial independence well before 60.

Got a retirement account? How’s it travelling?

 

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10 thoughts on “Superannuation Nest Egg Update (September YTD 2016)

  1. Interesting update WFT, and thanks for the breakdown of your portfolio – a very interesting mix. Long term it does look like you have more cash and Aussie shares than what advisors would recommend, but it’s totally up to you where you feel comfortable (and confident!) putting your money 🙂

    Good luck until the next update!

    Tristan

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  2. Hey there Tristan!

    You raise a good point. I read somewhere a while ago that asset allocation can account for between 70-90% of long term performance (obviously it’s such a vague estimate they can’t be too sure).

    The mix isn’t ideal for me yet. Because it’s a fairly small balance, the % amounts are a bit misleading. As it grows, I’d like to add some global property (up to 10-15%), further international shares (up to 50%), australian gov. bonds (up to 7%) and some alternative investments (up to 7%). I’d also like to keep aussie equities below 25% and direct cash to about $1000-1500 with total cash <5%. That's where I'm heading anyway, maybe by the end of 2017 or mid 2018 I'll have satisfied that mix, and will simply rebalance once or twice a year after that. I have my eye on Vanguard funds for the majority of future investments.

    Thanks for the thoughtful comment!

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  3. So are you mainly in Aussie companies because you think that is the best place to invest, out of national loyalty, because it is what you know, or for some other reason? I’m mainly in US shares (of course, the huge US companies like Coca-cola are effectively international since they’re everywhere) because they’re domestic for me and because I think the US market generally does better due to property protections and economic freedom. I’m curious about the perspective from the other side of the world.

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    1. Hi SI, thanks for the comment – the initial investment in Australian shares was my advisors suggestion, but the evidence suggests they outperform the broader Australian market (perhaps some consolation). I’m looking to diversify though as I’m not convinced investing the majority of my holdings locally is the best approach. The Magellan fund my retirement account invested in largely holds Visa, MasterCard, Alphabet, Apple, Yum! Brands and a few others. I think the “home town bias” is very common in Australia despite the Aussie equities market making up less than 2% of the global market (if we ever have a localised market collapse, millions of retirement funds will be heavily hit). I recently signed up to a low cost industry Superannuation fund which is basically a not for profit 401K and even their “high growth” fund is 57% Australian equities, 27% international (this is a premixed fund). I calibrated my own asset allocation to be < 3o% local equities and up to 55% global. I think in the very long run, this is a sound approach although would be interested to hear your thoughts on asset allocation for global investors.

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        1. That’s not uncommon here either. The ASX makes up 2-3% of the world market, so to my mind it makes sense to reduce exposure to it and increase my allocation to international equities. Because it’s a fairly small market, the major holdings in any Australian fund that mirrors the index are heavily weighted toward Financials and a handful of other sectors, I also like to keep that in check. Perhaps for the US, which is a much larger market, it makes sense to have a slightly smaller international allocation.

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  4. You haven’t done too badly really. Aussie stocks haven’t performed anywhere near as good as those in say the US. On the flip side, when things go backwards, Aussie stocks have less to fall. Sounds like you’re a pretty engaged investor though which puts you ahead of 99% of most Aussies who have no idea what’s happening with their super.

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    1. Hey Luke, thanks for the comment. You’re right, I guess compared to Australian stocks (and also due the declining AUD vs USD) international stocks seem to have been the asset of choice lately. I’ve done a bit of thinking on my Super and have changed things a little since this post, and will probably update it early next year.

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