Random Post #2 – Australian Superannuation

I was giving some long over due thought to my Superannuation today, and thought to myself, “I bet there are some low cost ETF-like offerings available to choose from as the underlying funds”.

And I was right!

Thankfully my existing Superannuation managing company offers a fair few to choose from, and even more thankfully – they offer products from Vanguard.

For those that don’t know, Vanguard was started by the master himself, ‎John C. Bogle.

Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds. This means lower ongoing management fees which is great for investors.

In the time that I’ve been in Singapore I have not been contributing to my Super any longer, but I built up enough before leaving to make it something that I periodically check on to see how it’s doing.

So last year I received the 6 monthly statement around December, and took a look at it and saw the following:

SuperBefore

And I thought to myself, “Wow those Property Securities sure do stink. Since I only have about 10% of my portfolio allocated to this I may as well just sell it off and buy more of those awesome Ethical shares.”

WRONG!!

Look what happened in the next 6 months:

SuperAfter

It was the one that flourished! 12.4%! Classic rookie mistake, selling low and buying high.

This is a very important lesson as it reinforces what you should do with your portfolio allocations – check your target percentages and top up the one that is falling below.

If I do my calculations after the fact of what I should have done, I would have been 1.473% better off over my entire portfolio. (Instead I am down 1.495%). If I had done nothing, I’d be down 0.56%.

This is why most investors typically under perform the market even when buying Index’s simply because they do the opposite of what they should have done – purchase the laggard to bring it up to the target %. Instead they try and chase the winners.

In my case my laggard had dropped down to 5% of my allocation instead of where it should have been at 10%. This was the right time to buy more, not sell it off.

Before I forget, in order to reach my 36% Bonds allocation for my overall portfolio, I have decided to sell off all of these Funds in the tables above to purchase the “Vanguard® Diversified Bond Index Fund” instead.

This Index fund is more aggressive in terms of risk compared to the ABF SINGAPORE BOND INDEX FUND (A35), however I think it should complement my overall profile quite well.

This new fund has an ongoing management fee of 0.37% which is very good for this kind of product in Australia.

Previously my funds were charging me:

  • Australian Property Securities   0.83%
  • Australian Shares – Value         0.65%
  • Australian Shares – Ethical       0.98%

Fingers crossed that this new Vanguard Index fund continues to perform well and maybe gives me a little more upside to my Bond allocation.

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