Just went 95% cash in Super - Share Market Correction

mate are you back into cash again now?!

 

Nope moved to conservative balanced. Since Nov....it has grown quite a bit.

 

That could only be a 2% move depending on the balance

@sash

I've been told that even if you move from one fund to another in an industry fund there is still CGT impacts, as you've essentially sold out of one fund (i.e. conservative, balanced, growth) and bought into another.

 

The problems of allowing choice and providing the ability to meddle. Both should be banned. Only my view.

 

About 6%. There maybe CGT but it is I think aobut 10% in super.

 

10% CGT only if held for 12 months otherwise 15%.

 

Correct. The sell down to cash can be a CGT event. A inspecie transfer isnt ! (Typically a smsf but many other funds do allow inspecie transfers IF you hold a direct listed investment.) Inspecie transfers can result in registry fees and anomolies in values between two funds due a obscure tax ruling. The timing for the transfer can also mean loss of earnings. Often 3-5 days.

There is also a likelihood of double fees in that month since most funds charge a fee per month that isnt pro-rata adjusted for the days.

There is also a buy sell spread on unitised investmnet holdings (eg growth strategy).

There is also a possible exit fee

There is also a possible brokerage issue if anything is direct (and often a trustee fee per trade or for the facility that maybe a annual fee)

 

So you saying that AMP members are stuck with AMP ?

One of the best features of super is portability. Competition and public data assist members to be more decisive about THEIR super provided it remains preserved in the super system. The outflows from higher fee public offer funds is a tsunami.

 

I read it as some of these funds that allow you to change internally from growth to balanced to conservative at a whim, also the DIY mix options available where someone may jump in and out of shares depending on their perception on where the market is headed?

Some flexibility is great but sometimes you can also be your own worst enemy

 

Was a comment ruminating on one made by @Rolf Latham earlier on in this thread but I can see how it could be taken out of context.

 

Very true. However avoiding market corrections by adjusting risk is an important consideration. Its ironic that most industry and public offer super strategies actually PROHIBIT or highly discourage this. eg a growth strategy does not allow 95% cash or dropping out of equities. It forces people to ride the roller coaster off the cliff then dust off and remain in the wreckage. Its probably one of the worst elements of adopting a default fund strategy in any super fund and why many see a SMSF or direct choice as a option for control of risk. I call it a Thelma and Louise strategy. Its one way - down even if you see a crash coming. You dont see industry funds running TV ads about that one.

In the GFC shares dropped 40%. It took the ASX 200 11 years to recover in June 2019. However if a investor had gone to cash in June 2008 then immediately purchased a ASX 200 based portfolio they would be looking at a 66.6% return to 2019. Versus the other guy who is now square. The loser could have been in a cheap industry fund.

Of course its a generalisation. The investor could have also bought specific shares which tanked but back in 2008 (and even 2015) no funds allowed member directed choice. We also note that most funds that do allow it now have very narrow approved products.

 

I think the ASX200 got back to Pre-GFC levels by around 2013 (five years) when looking at the accumulation index (thanks dividends) continually adding new cash inflows throughout that period (i.e. regular super contributions, DCA, re-balancing) would also have helped

 

You can't count income as capital. The ASX 200 took 11.5 years to recover the investment capital. It's like looking at a property crashing and counting rent you didn't pay

The ASX's long, long road to recovery

 

@Paul@PFI

Definitely a diffident scenario if a younger person in accumulation phase rather than an older person in retirement phase

I was working with a semi-retiree who's retirement took a massive hit when listed property trusts took a dive

 

That would have hurt. Mind you many were.

STW as a proxy was around $54 in early 2008, fell to approx $32 in mid-2009. Climbed upwards from that point with the usual gyrations. Distributions would have helped but they were also down, especially when compared with the unusual highs of preceding years. Point to point I get it but I've not done any numbers for STW of the effect of someone holding at $54 and then keeping on buying even when at $32. Would it take 11 years to recover or would it be less?

 

As you and I know given that we invest in “shares for income” this discussion is nothing but an academic exercise.

ASX 200 dividend chart shown below. The dividend distributions (highlighted) around the time of the GFC were outliers. If one looks at the underlying trend of dividend distributions (with the usual ups and downs) it just kept merrily trending upward:



And below is the dividend chart of one of the most boring LICs available being AUI. Do you think these investors who typically buy LICs for their “dividends” gave a stuff about the GFC?



And finally as for comments along the lines of “if one sold when ...” well I won’t even waste energy commenting on the mythical investors out there who supposedly can walk on water .

 

Yeah but....

Doesn't bother me if I'm always right. You?

 

This is exactly the conclusion I came to after my personal analysis of the data, which I've written about elsewhere. Yes, the dividends did drop when the GFC hit, but the 3 or 4 years before were outliers and if you didn't realise that at the time and thought we were entering a new golden age, you probably weren't paying attention. Ignore them in the graph and it's a fairly standard upward trend.

And if you were paying attention you just banked the extra cash, or kept investing it - you didn't think "I have lots of extra income to spend, I need a yacht!" - and have done just fine as a result, however stomach-churning the gyrations of the GFC were at the time.

And also that AUI did not cut dividends at all during the GFC - they just held them for a few years, which is why I own it. When @SatayKing lets me buy any, that is...

 

On an only slightly unrelated matter, I've noticed some of my much younger work colleagues, who earn, comparatively, far more than I did at their age, if still somewhat less than I do now, have fallen into the trap of mistaking good current income for wealth.

One day they will understand.

 

Buy away to your heart's content good sir.

The SMSF buys every six months through a thing called DRP and 50% of my personal holdings does as well now. Fewer decisions the better. Said once it'd be great if I could clone myself by removing any angst about what and when to buy. Getting there even at my age. Or maybe senility is setting in. Only time will tell.