Is it better to buy ingredients separately or like a cake mix?

From what I understand, the more humans try to actively manage shares the worse the result is.

If I've understood that correctly, and if I'm applying that idea to super correctly, my question is:

Are the ready-made options for ethical super (or any of the other option categories) like a shake cake mix - more expensive as humans have conveniently powdered and pre-measured everything first?

I've not paid much attention to super before because there's usually only one ethical / social option.

But now I'm wondering if we are meant to buy the flour, sugar, bicarb, milk etc separately because that's the better value way to get the same ingredients and ultimate result?

I don't mind leaving some money on the table to not cause harm, but not for the particular way humans packaged or purchase the shares.

I might be misunderstanding things or misapplying the idea so please correct me in this case. Thanks super brains!

 

Supernnuation pre-mix options provide a style of investing that just isn't available to the common investor. My understanding is the super rich invest a lot like our Industry Super funds do (private equity, unlisted, listed etc.).

That being said, depending what option you want, it can be much cheaper (think 0.1% annual fees versus 0.6% annual fees) for DIY investors. The example I am thinking of here is DIY options in ART Super for shares versus high growth.

There's risk involved in DIY, and some assets aren't available via DIY (e.g. private equity). That being said, if you know what ingredients (assets) you want, and they are available DIY, yes it is cheaper to bake your own cake.

There's lots of things in life I choose to pay others to make for me. Then there's a large list of things I hate paying for as I can do it cheaper and better myself. With Superannuation or investing, only you can decide which option you prefer.

 

Thanks Y-man!

The skills to replicate a list of shares but being able to add / remove what you want seems useful if there's a risk you pay a premium for green washing rather than actually doing no harm.

(ABC article just before Christmas: ExxonMobil, Woodside, Santos: Investigation finds sustainable super funds littered with $1 billion fossil fuel investment - ABC News)

For anyone interested, Future Super, Australian Ethical, ESS Super, and Prime Super were the only one's with 0% fossil fuels.

 

Thanks Sgav,

That's really helpful detail about the fees, and to know that not all shares are available in DIY mode.

I'm in learning for now. But if a retirement plan covers the next 20 years, no reason why I can't become very capable, or at least to make an informed and conscious decision about whether pre-mix cake is right for me or not.

No one knows how long their health will hold so deciding what premium to place on your time and energy is a very wise approach. Thanks for that consideration too.

 

Thanks Y-man,

My little sister told me yesterday that she has a SMSF so I felt quite the fuddy duddy for being behind!

Consideration set in order of time and energy input:

1. Pre-mix option --> pick best option that's not green washing, considering fees and returns.
or
2. DIY option --> see what shares you can buy in within it, consider fees relative to pre-mix.
or
3. SMSF option --> compare with DIY option re what you can buy and cost to set up/ sustain relative to DIY and pre-mix. And potentially compared to holding property outside it.

At the moment we have an equal amount of equity in IPs and super.

But if we were to sell IPs to buy a more typical IP for future capital growth, perhaps that'd be when to consider SMSF.

 

I was disappointed to see that ART's default 'retirement' option charged circa 1%. I was looking in to this in regards to a parent's super status/account once they retired.

Great that you're learning the ropes in the mean time. Good luck!

 

I would strongly recommend against attempting to construct and manage over the long term a portfolio of “ethical” equities for your retirement income.

You are opening up a huge can of worms with regards to ongoing decision making and error. Take an off the shelf (likely industry)fund of your choosing and stick with it.
I am of the view that most people with SMSF would be better off without it.

 

If those funds align with your tastes, they would probably be a better option than trying to roll your own.

Or just invest in a low cost index fund and put your savings towards environmental pursuits.

 

Sweet that you're looking out for your folks Sgav, good luck finding a good fit for them!

Thanks The Falcon, I agree that unnecessary complexity is a fail, and worse when it outstrips your skills.

My family held 'board meetings' with grandpa to help him tidy up/ simplify complex investing arrangements that had become overwhelming shoeboxes of investment papers.

Thanks for the thoughts and video Hockey Monkey. It was a really good review, watched it twice!

I would have expected lower returns would be due to fair costs in the value chain, so I got a bit lost with how tastes shape pricing and returns.

But it had good advice about the complexity in making sure you're getting what you're paying for. And the risk adjusted return conversation was interesting too. Appreciate the share, thanks!

 

You definitely need to lift the hood if looking at ethical investments

 

He popped the hood into thousands of pieces. Call 911 when the 911 burns.