Superannuation....LICs, ETFs, REITS, shares and all that stuff....

I was going to respond to a post by @WestOz in the thread In less than 3 months, the place is a pigsty again but I didn't want to derail the thread so I thought I would create a new one here to discuss something I often hear and wonder if it is fully understood.

When people say things like "should I put money in super or invest in the share market" it is a little bit like saying "should I put money in residential real estate or houses".

"Super" is what we refer to as a "legal entity" or "vehicle" (a special form of "trust").

It is NOT an investment in its own right.

Most people when referring to super, are actually referring to "managed investments" or "managed fund" run inside the super (usually by banks).

What most people perhaps don't fully comprehend is that those managed investments are essentially salary earning people just like you or me (called fund managers - they aren't genetically modified or anything) taking your money and buying shares.

In this aspect, it is no different to putting money directly into managed investments. What "super" does is to give those investments (significant) asset protection and tax benefits.

So I hope people understand when we see threads on LICs, ETFs, REITs we are really talking about the same back end as "super" but with more flexibility in when we can invest, take money out, etc (but without the asset protection and tax benefits buying through super offers).

The money trail goes something like this:

Investing in super (the correct terminology actually is "through super"):

you > super fund manager (takes a fee) > shares (selected by super fund manager)


Investing in LICs, ETFs and REITs are similar:

you > LIC fund manager (takes a fee) > shares (selected by the LIC fund manager)

you > ETF fund manager (takes a fee) > shares/commodities/index (selected by the ETF fund manager)

you > REIT fund manager (takes a fee) > commercial property (selected by the REIT fund manager)


What can get interesting is if your super fund is used to invest in LICs, ETFs and REITs

you > super fund manager (takes fee) > LIC fund manager (takes fee) > shares (selected by the LIC fund manager)

etc....

One particular mode that happens very often is:

you > super fund manager (takes fee) > REIT fund manager (takes fee) > commercial property (selected by the REIT fund manager)

This one happens whenever you select the "property" option in your super fund managers investment allocation.



So if you have been ignoring or have been too scared about all the talk on LICs, ETFs and REITs - chances are your money is being treated in the same way, just under a different name.



The Y-man