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Are industry funds better than retail funds right now?

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I have heard a lot of talk lately about why industry funds are better than retail funds from financial institutions and I would like your opinion. I am 37 with about $200,000 in my super fund following an inheritance windfall and I am wondering if I should start a self-managed super fund.

I like industry funds for people who just want to set and forget their super. Not all industry funds are as good as the best and so I recommend you look at www.superratings.com.au or www.chantwest.com.au where funds are rated. I want to know what their longer-term results have been like and what their fees are. There are good funds charging less than one per cent and some are closer to 0.7 per cent or even lower. There are good retail funds and their fees are coming down.

Always check what extras you get with the super fund, such as life insurance and the amount of coverage you get and then this should be compared on a relative costs basis.

If you want to take charge of your super, $200,000 is enough to get your costs down to around one per cent in the early stages provided you get your costs of running the fund to around $2000. But as your fund grows and your fixed costs stay the same, the percentage costs fall.

Some experts generalise that you need more money in your fund but I reckon that’s debateable. I must say you then have to come up with a strategy that will at least match the market and I have suggested in previous columns that some people looking at a balanced fund could put 35 per cent of their money into a term deposit and 65 per cent into an ETF for the S&P/ASX 200 and that would be an okay portfolio of assets.

Let me remind you that I said it would be an okay portfolio and you could do much better with some professional guidance, though that’s not guaranteed. In a better world, you would have exposure to property and even some bond funds, as well as foreign shares but that may be something you could do after some research or after finding a trustworthy adviser.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, October 13, 2011

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