Just went 95% cash in Super - Share Market Correction

Discussion in 'Sharemarket News & Market Analysis' started by sash, 25th Oct, 2018.

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  1. Spud1966

    Spud1966 Member

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    I am with you - just moved to almost all cash in super. I am sure I will miss some upside but will be ready when their is a correction. CAPE ratios very high. Getting lots of upside on our Melbourne properties outside of super so not missing out on all the sentiment! As you say, time will tell.
     
  2. Redwing

    Redwing Well-Known Member

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    @Spud1966

    So you sold out of the majority of stock positions, took the CGT hit and went to the superannuation accounts cash interest rate?

    Australia's CAPE ratio at 19.6 is currently lower than in the article below, US is still at historic highs (31.1) , have you considered other (developed) markets the UK is at 16.5

    The CAPE hanging over share markets
     
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  3. Spud1966

    Spud1966 Member

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    Yes, I think the UK is much better value for sure though not without it risks with brexit etc. Long term I believe the Aussie index averages 15 so 19 is still a fair bit over. USA is scary and unfortunately, we will probably follow them down if there is a correction. Boffin or buffoon - Time will tell!
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Many industry funds and default "smart super"products now include a member specific basis that scales risk back based on member age. This tapers back high risk growth to lesser risk stable investments as retirement age approaches. Many members remain ignorant of the risks or overlook it and the trustee assumes a degree of responsibility to taper member risk as age increases

    Many call it a lifecycle super strategy and its often the default simple super option

    eg Sunsuper : Lifecycle Investment Strategy | Members | Sunsuper

    Its a major risk management feature that many in SMSFs ignore. They then wake to find a market correction has occurred
     
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  5. Redwing

    Redwing Well-Known Member

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    @Paul@PFI

    I know in the US vanguard have Target Date retirement funds

     
  6. Heinz57

    Heinz57 Well-Known Member

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    But the low ratio of equities in these funds may pose a higher risk for a 30 year retirement - low yield
     
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  7. truong

    truong Well-Known Member

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    This is standard advice that may not work for a lot of people. I was retired at around 50 with possibly 40 years of retirement in front of me, much longer than my entire working life. To move away from growth assets for such a long period of time is almost certain to cripple my income and eat into the capital needed for a nursing home.

    Beware of textbook, one-shoe-fit-all, short-termist strategies when a really long term view is required.

    Looking back on this thread, if @sash had persisted in his initial intention of staying out of the market for 12 months till October 2019 I guess he would have regretted it. Fortunately he appears to have done otherwise.

    Timing markets is tricky. For someone like me who has to stay the course for 40 years it’s something I’d be loath to do.
     
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  8. virgo

    virgo Well-Known Member

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    Hi Truong

    I get your point about long retirement years But would it make a difference.. say IF you were still contributing funds into the market IN retirement Versus a retiree who has stopped working and has NO MORE contributions but instead need to withdraw for his retirement expense?

    Therein I think lies a need for scaling down "risk" from having a too high an equity exposure..but happy to hear your point(s) of view...
     
    Last edited: 31st Jan, 2020
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  9. MTR

    MTR Well-Known Member

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    i agree.... one shoe does not fit all

    just have to read @skater thread, retired but the odd reno to increase capital/income.

    Pretty much what I am doing, but small development projects and also flipping a property
    Whatever works
     
  10. Ross Forrester

    Ross Forrester Well-Known Member

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    A lot of very wealthy do not do this life cycle approach either.

    when you wealth gets to a level and a 50% drop in the value of your investments does not come near to affecting your lifestyle you can take on more risk.

    the cookie cutter pie chart does not work for the wealthy people or those with private business making a large dividend stream. If you only have $200k to invest and your 70 you should focus on a very defensive portfolio.
     
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  11. sash

    sash Well-Known Member

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    I have moved into growth assets again..but about 45% are in shares.

    Another 35% is in areas like Real Estate Funds, Growth Infra, and Private Equity.

    20% is in fixed interest, cash, bonds, etc.

    So a conservative fund but still growing....this is my Super fund.

    But also creating a Clayton's super fund outside of Super.. I simply buy ETFs/LICs for the longer term. ;) It has about 200k in it but also leverage at about 35% LVR.

     
    Last edited: 31st Jan, 2020
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  12. truong

    truong Well-Known Member

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    I’ve stopped working some 16 years ago and my income now comes exclusively from passive investments – property in trusts and LIC shares in SMSF. I’m withdrawing the prescribed amount (5%) from my SMSF and the only reason it’s still growing is because it yields more than that, inclusive of franking. A lesser yield would have seen me eat into my capital in an ever-accelerating fashion till it’s depleted. Unfortunately I’ve seen people depleted of capital at the very age they need to go into care.

    The issue you raise is a very valid one. I can only speak of my own strategy which despite being simplistic has allowed me to avoid most financial worries:

    - to be fully invested in growth assets apart from a cash buffer (3 years of living expenses) and instant low-cost debt facilities (e.g. offset accounts) to remove the need to sell in low markets.

    - more importantly, to be income focused, not price focused, hence the choice of property and LICs for their relatively stable income and to remove any temptation to make too many decisions in a world that’s too complicated and turbulent for anyone to understand.
    A 50% drop in value wouldn’t affect me as long as my income remains broadly the same, hence the importance of being income focused. Speaking from experience here as we were fully invested during the last GFC.
     
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  13. Gen-Y

    Gen-Y Well-Known Member

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    Sounds like a Conservative balanced super fund.
    It is shown it is 50% growth asset and 50% defensive asset.
     
  14. Nodrog

    Nodrog Well-Known Member

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    YES
    YES
    YES (except for property):)
    DBEF1223-5EC8-4F9F-99CC-BC0266DC7575.jpeg
    YES
     
    Last edited: 31st Jan, 2020
  15. sash

    sash Well-Known Member

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    Yes it is....it still doing 7-9% per annum.
     
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  16. virgo

    virgo Well-Known Member

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    Sorry i am not very bright but what is a Clayton Super Fund?:)
     
  17. wylie

    wylie Moderator Staff Member

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    ... the super fund you have when you don't have a super fund... as per the old Clayton adverts.

    So I'm guessing it is a retirement fund that isn't actually superannuation?

    Like a Renoir would be a Clayton's super fund.
     
  18. Redwing

    Redwing Well-Known Member

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    @wylie

    Or tins of cash buried in the chook yard :D
     
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  19. kierank

    kierank Well-Known Member

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    From what I hear, that is @Nodrog
     
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  20. Redwing

    Redwing Well-Known Member

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    With his guard chickens

    upload_2020-1-31_16-43-30.png
     
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