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I am 32 with about $100,000 in super — I have been putting extra in — and I have not investigated the best super fund. I was thinking about setting up a self-managed super fund but I am not sure. I want to get involved with stocks and wouldn’t mind an investment property inside an SMSF but, as I say, I am not sure. My boss put me into a fund run by a financial institution but I don’t know if it is any good. The returns were negative a few years back but they are picking up. What do you think?

For starters I think you should not think about an SMSF until you have at least $300,000 in your super. To run a fund, it can easily cost you with accountant’s fees, audit costs and other slugs around $3000, and so this gives you a cost of 1 per cent. This compares to many industry funds, but some are less. If someone comes to my financial planning business with $500,000 or, say, $1 million and like you they want to do a SMSF, well the maths stacks up. On $500,000 the cost is 0.6 per cent compared to 1 per cent with many funds. For someone with $1 million, it is only 0.3 per cent or 30 basis points. On super generally, all funds have been on the comeback trail and I’m glad as I’m a great believer in the saving vehicle, but it would be better if the government stopped changing it. For the nine months to March 2013, the return was 12.5 per cent while the rolling 1-year return for the median fund was 10.5 per cent. For three years it was 5.9 per cent per annum and for 10 years it was 7.2 per cent per annum, which is what you expect from super over this better time period to assess a fund. So if your fund performed worse than that and its fees are higher, then look for a good industry fund, which are generally cheaper and have been very good performers. Note that the seven-year return was only 3.7 per cent and that was the hit of the GFC, but see how bad times get weeded out if you stick with stocks for the longer timeframe. Have a look at websites such as SuperRatings.com.au, which will help you make comparisons and will show you some good long-term performers.

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: Wednesday, May 29, 2013

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