Question about Superannuation and Coronavirus?

funnysht on 29/06/2020 - 22:51
Last edited 29/06/2020 - 22:52

Hey guys

My father's super account has dropped by $1000 in a week. At the moment it is balanced investment with Aust super.

What do you guys reckon the safest swap would be to avoid any further drop? He is 64 but probably withdraw few thousand a year out..

I'm keen to just change to cash option- does that mean then it won't gain loss (or profit)? Personally i would keep away from shares, real estate. I reckon changing to cash now and then maybe once a vaccine is found or in 6-8monts when the amercian economy starts recovering, to change back to balance.

Poll Options

  • 18
    Balanced
  • 1
    Socially Aware
  • 0
    Indexed Diversified
  • 1
    Conservative Balanced
  • 0
    Stable
  • 0
    Australian Shares
  • 3
    International Shares
  • 1
    Diversified Fixed Interest
  • 10
    Cash
Financial

Comments

  • Trying2SaveABuck on 29/06/2020 - 23:00
    +13

    DONT CHANGE TO CASH NOW THAT IS THE DUMBEST THING YOU CAN DO IN A DOWN MARKET

    • funnysht on 29/06/2020 - 23:04

      i kind of get that but his account hasnt dropped much since the coronavirus epidemic- just don't want further drops- rather keep the money he has than hoping it'll go up in a down market

    • fantombloo on 29/06/2020 - 23:05

      Down?

    • whooah1979 on 29/06/2020 - 23:44

      What?

      Are you saying that Op should hold when a bear is coming? Smart.

  • CyberMurning on 29/06/2020 - 23:05
    +4

    No body knows

  • netjock on 29/06/2020 - 23:06
    +1

    $1k per week on balance of $10k or $100k or $1m? Magnitude is puts the question into perspective.

    You need to really look at how the investment option is constructed. If it goes up $5k a year from dividends then keep it.

    Imagine if you sold out in March at the lows, then you would have locked a good loss. You never know what is around the corner.

    If he can't sleep at night losing $1k then maybe he should switch it something safer. It is all about appetite for risk.

    If you switch to cash you get like 2% return (if that), if only then he can sleep then go for it.

    • funnysht on 29/06/2020 - 23:15
      -1

      i bleive he prefers not to lose 1k,

      so if switches to cash then do you just earn interest on it - roughly typically 2% a yr (regardless of what the stock market may do?)

      • netjock on 29/06/2020 - 23:17

        if switches to cash then do you just earn interest on it - roughly typically 2% a yr (regardless of what the stock market may do?)

        You need to look historically what the cash option returned for the provider. Don't forget we've had 0.5% rate cut therefore take 0.5% off that number.

      • El-Rhi on 30/06/2020 - 15:31
        +1

        Good luck getting 2% in cash. More like 1% if lucky then take out fees and inflation, which means you’re likely losing money in the all cash option.

  • elgrande on 29/06/2020 - 23:17
    -3

    $1000 in a week? Thats not much..

    How olds your father.. 19?

    • netjock on 29/06/2020 - 23:19

      Last week was bad. Just Friday the Dow Jones Index went down 2.84% so it depends on the portfolio how much $1k translates to. The fund would have tanked in March and came back up to pretty much even but you know it is like a roller coaster ride and people screaming to get off after the first bump.

      • funnysht on 29/06/2020 - 23:22
        -1

        true would rather just change to cash during these bumps and when the panademic is over and starting to recover go back to stable investment ? or is that everone's plan

      • Cheeper on 30/06/2020 - 00:55

        Up 1.67% at 10.30am monday (their time) still 5.30 hrs of trading to go. Will it make up fridays loss?

  • Cave Fire on 29/06/2020 - 23:39

    So the unit prices increase as the market recovers. By staying on Balanced, he would have recovered slightly, roughly 15% or so from March. It takes a while for it to show on your statements. You can find out how many units he holds and then find a unit price quote. This should be more updated than what is in his super "Balance". I am hopeful for further recovery around mid July (assuming borders are opened and Stage 3 restrictions are in place).

    • funnysht on 29/06/2020 - 23:47

      thanks, i would have thought once the gov stimulus e.g. job seeker payments extra finish in sept, there may be a decrease in the economy

      • Cave Fire on 30/06/2020 - 10:39

        There will be other stimulus by then imo. Any dip is also temporary, depends whether you can just wait till the recovery.

  • onetwothreefour on 30/06/2020 - 06:58

    Out of interest, when you login online to your australian super account where do you have to go to see how much your super has chnaged in a week? I've never seen such up to date info in my account.

    • funnysht on 30/06/2020 - 08:23
      -1

      it depends on which super…my personal super cant see it (hides it)…but australian super , it shows on your trasnsaction list at the bottom states total loss from start of this year's financial year, i just logged in for him a week ago and now …it was -$50 and then -$650

      • DoctorCalculon on 30/06/2020 - 20:43

        Net investment yields that you refer to above are based on daily crediting rates. This is fully explained at the bottom of the page (if you bothered to read it).

  • nick484 on 30/06/2020 - 07:50

    He's 64. If he's planning on retiring any time soon, move it to cash. Don't try and time the market. Yeah, we are at a low point now, but there is nothing to say that it isn't going to go lower

    • funnysht on 30/06/2020 - 08:22

      yeah that whats i was thinking

  • toniyellow on 30/06/2020 - 08:31

    You don't have to move 100% of it to cash.

    But creating a cash buffer to ride out any downturns is wise if he is at retirement age.

    This article
    https://www.moneymag.com.au/super-retire compares converting 100% to cash with converting a percentage to cash

  • Fredfloresjr on 30/06/2020 - 09:54

    CASH. 64 years old. Go YOLO and use that hard earned money to live life.

  • brad1-8tsi on 30/06/2020 - 09:54
    +1

    His super has been going up and down on a daily basis since he started the account. In 2008/9 it would have dropped 30% (mine did).

    Mine moves about $10k up/down daily. At the moment I'm $80k down but was $250k at 1 stage.

    I wouldn't go 100% cash but 30-50% might stop you worrying.

    Keep in mind he will hopefully live another 20+ years and cash will not keep up with inflation.

  • Seraphin7 on 30/06/2020 - 09:55

    My father's super account has dropped by $1000 in a week.

    I'm keen to just change to cash option

    What's your dad want to do?

  • jv on 30/06/2020 - 10:43

    Personally i would keep away from shares, real estate.

    I'm guessing you don't have any financial qualifications as you are asking for financial advice on OzBargain.

    As such, what is the basis of your decision to keep away from shares and property?

    • whooah1979 on 30/06/2020 - 10:51

      Volatile speculation?

      • jv on 30/06/2020 - 10:54

        scire licet…

  • wannagrababargain on 30/06/2020 - 12:22
    +4

    The Balanced fund is actively managed. Your father already has 'cash' as a portion of the balanced fund. Australian Super will actively manage the allocation of assets within balanced, up to 20% can be in cash at any point in time. Only 10-45% of balanced is in Australian Shares and 10-45% in International shares. Typically this sits around the middle of that benchmark. The net effect of this is that when the local share market goes down 30%, the 'Balanced' fund might only go down 5-7%.

    https://www.australiansuper.com/investments/your-investment-…

    The second thing to consider is whether or not the Balanced fund is the appropriate choice for your age and appetite to risk. This is a bit of the downside of the 'one size fits all' approach of the super funds. The 'balanced' option of one super fund might have a different risk profile than the 'balanced' of another, that's why you need to check the details. Adjusting asset allocation should not be made as a knee-jerk reaction but be made ahead of time with clear thinking. There are daily asset price cycles but also multi-decade price cycles. The balanced fund is designed to smooth out those multi-decade cycles at the expense of being subject to the short term ups and downs.

    The third thing to consider is with Australian Super the investment switching process takes 2 full business days and will effectively 'price' your investment at the end of the next business day after you request the switch. In a volatile market, if say tomorrow the markets crashed, you would effectively be locking in those losses. The markets are currently volatile which means it's a risky time to switch within Australian Super.

    • macfudd on 30/06/2020 - 23:12

      This is a very good answer. And to me shows the importance of investigating specifics when looking at Superannuation funds. Things might have the same name at different funds but you have to look at what that means for that particular fund.

      I don't believe AustralianSuper uses unit pricing, but I pulled the daily crediting rate spreadsheet for you from their website and looked at the balanced option. March overall was -9.897. April was +3.388, May was +2.2516. June so far was +0.7947. So here's the challenge. You say your father wants to avoid further loss and you want to jump back in when the markets start going back up - well based purely on those 4 stats - it sorta is coming back but the rebound is slowing. But things are changing daily with Covid.

      If your father is close to retiring it probably is worth getting him to talk to a financial advisor, there are apparently independant ones out there. It sounds like he needs to have a good conversation about risk, the impacts it can have, what he is comfortable with and what his options might be - and there are a lot of options, just look at the variety of responses in this thread alone and I bet there are plenty of others.

  • blueyez on 02/07/2020 - 13:35

    Panicking and switching, followed be the realisation that most funds have recovered and 'missing out' on the upturn are things worth thinking about. The answer before mine is quite detailed - please seek advice from a financial advisor with sound investment knowledge.

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