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Smart Investing
Choose your super fund wisely and retire wealthy
 December 3, 2007
Robin Bowerman
Buying a new car is exciting.
There is so much choice, so many colors, body styles, engines and brands to choose from.
Your budget helps narrow the choices substantially. Some brands will resonate; others will be a real turn off while practical stuff like four doors or two, work needs, number of children, hobbies and lifestyle will all have to be factored in.
Make no mistake buying a new car is a serious financial decision – but it is also fun -even if you realise that the day you drive out the showroom door in your shiny new car you just took a depreciation hit the likes of which would you cause you sleepless nights if it happened to your investment portfolio.
If you have bought a new car in the recent past think about how much time you invested in the process.
Now think about how much time you would spend buying a new super fund. Paradoxically most people spend a fraction of the time selecting or monitoring their super fund yet their choice of fund – or investment options - could have a significant impact on whether on not they can afford not just a new car but be able to fund their entire lifestyle when retired.
If you are in the market for a new super fund how would you go about selecting it?
What features are important to you? Performance perhaps – how fast will your new fund get from zero to $100,000? While you can reasonably expect your new car to replicate its performance for the foreseeable future the same is not true for super funds.
In the same way that the type of driver you are will influence your choice of car the type of investor you are will have a big bearing on what super fund – or the investment options within it – you opt for.
If you enjoy changing gears and being in control then perhaps a manual self-managed super fund will suit you; if you are a set and forget type of person who wants the professionals to manage the money then a broadly diversified fund with a mix of asset classes may be the right choice.
No-one knows what future returns will be but you can predict with reasonable certainty what your costs will be. And with super funds it is almost the reverse of the car buying decision. The more you pay for a car the more (hopefully) you get in terms of performance, safety features and production quality.
With investments the opposite is true because the more you pay in fees the less you get to keep of the returns generated by your capital.
It is hard to foresee a day when super funds can command the sort of attention that selecting a new car – or even next year’s holiday destination – does. That is hardly surprising. By its very nature – intangible and all about deferring pleasure a long way in the future – super struggles to compete for attention particularly in today’s instant consumer society.
Yet the super fund is the key that will unlock all those lifestyle decisions in your retirement. Perhaps we need to start looking at our super fund statements with that in mind.
More articles from this edition of CompareShares:
Superannuation: What will Rudd do with our super?
Investing Psychology: Do you have a profitable personality?
Stocks: Buying opportunities for transport stocks: BXB & RCY
Trading: The ultimate guide to trading shares for beginners - part 3
Stock of the week: Dip creates buy opportunity on hot construction company
Economics: Party economics: Australian-style
Outlook: Is an Australian recession on the cards?
Smart Investing: Choose your super fund wisely and retire wealthy
Markets: A volatile month for US stocks
Companies: Market believes Rio worth more, says CEO
Whatever your views, you can discuss this article - or any of Robin's articles - on our message board Your 2 Cents.
Robin Bowerman is Head of Retail at index fund manager Vanguard Investments Australia and the former managing editor of Shares and Personal Investor magazines. To receive this column by email each week go to http://www.vanguard.com.au/ and register with smart investing.
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