Am I Wise to Have Switched My Super to Conservative/Defensive?

I am with Australian Ethical Super and have had a great run with the Australian shares option over the last 18 months. For the next year or two I plan to leave my money in 50% conservative 50% defensive. I am hoping to avoid being slaughtered if there is a crash.

In your opinion am I wise or stupid to have made this decision? I realize it's time in; not timing the market. Am I being fearful and breaking the rules? Or is there going to be a massive collapse predicted by market legends such as Warren Buffet?

Comments

  • +3

    Beware that due to inflation, your cash investments can lose value.

    Investment advice will largely depend on your age and risk appetite.

    • I am 43 years old.

      • +26

        You got like 20 years. Look at 20 year charts and all the crashes are a small blip. Time in the market, not timing the market

    • +2

      One can always select multiple portfolios and allocate according to what they believe will happen in future
      Unfortunately that part is unpredictable

      Hence there is no correct answer for OPs post
      It can only be answered retrospectively i.e After the event looking into the past

  • +9

    I am 43 years old.

    In your position, I'd be looking at the best returns your fund will currently give you.

    You still have 20+ years until retirement so even if there is a crash there will also be some highs in that timeframe. On average you should still be better off.

    Super funds have seminars as well as consultants you can speak to. Might be worth looking into more qualified advice.

  • +1

    Look at what the returns have been, not just for the last year but go back the last 3-5 if you can.
    (obviously, past performance is not a future guarantee).

    • Australian Ethical's award-winning investment team delivers a track-record of market-leading returns.

      While we can’t predict future performance based on the past, the Australian Shares super option ranks #1 on returns over 3, 5, 7 and 10 years according to the SuperRatings Fund Crediting Rate Survey – SR50 Australian Shares Index as at 30 September 20211

  • +1

    How old are you and when do you want to retire?

    • 43 years old. I would like to be semi-retired by the age of 65.

  • +4

    You’ll need a solid plan of when you will change the investment mix back

  • +2

    Monte Carlo simulator says no, you’re not wise

    • black ball says yes, you a wise

      • pokies say, feed me your money ill give you a good return

        • bet.com.au says bet on NoVac being deported, 5 to 1

  • When is typically a good time to switch to ‘high growth’? Assuming if OP has 20 odd years until retirement.

    • +8

      I was told nearly 20 years ago when I started working to put it ALL in high growth until 10 years before retirement. I only got around to it 3 years ago and my super has doubled in that time. Imagine if I listened earlier.

      • +2

        It's pretty good advice that you received. Doesn't pay to think too much of opportunities lost as I'm sure you had your reasons for not taking that advice.

        Just thought I would add that one of the flipsides of high growth is that when the falls come, they come hard and they fall deeper. If you stay the course and don't sell out, and if you have the funds you buy more, then you're fine. And you even turbo charge your performance by buying more.

        But the reality is that emotional/psychological frailties become exposed when the market crashes. Some people do in fact sell out at the worse time. So it's not for everyone.

        I'm in high growth and have experienced a few crashes. But I've helped my parents into a conservative strategy as they are in asset protection mode. When the pandemic crash happened it was very pleasing to see that while my portfolio dropped by 40%, theirs saw maybe a 5% decline or so. Obviously it hasn't grown so much since but security and stability is a much bigger concern for them than growth.

        • what's the investment breakdown of their asset protection mode out of curiousity? cash/gold/bonds?

          • +5

            @May4th: Nothing as exotic as gold!

            Actually, I was only talking about the relatively small amount they have in managed funds (vanguard conservative index). They have the bulk of their assets in residential property (and we aren't talking much, primarily PPOR + investment), but like a lot of people, they are more inclined to fixate on the ups and downs of the managed fund and ignore the concentration risk represented by their property. And they have a bit of cash.

            But to be fair, their main risk mitigation strategy is their inherently frugal nature. They have no interest in positional goods, eat out occasionally but enjoy making their own food, aren't materialistic consumers etc. They are comfortable, not because they have a huge stash, but because they don't really want for many things, which has resulted in them being able to accumulate a stash sufficient to make them comfortable. It's a virtuous circle. If anything, I have to negotiate with them to occasionally buy things to improve their lives - so it's an altogether different problem!

      • Which fund has given roughly 30% p/a returns for the past three years?

        • +1

          Could be including contributions in the doubling of the balance.

      • Yea I have read similar too. As High Growth typically focuses more on Australian & International shares, I'd imagine that the best time to switch from Balanced/Conservative to High Growth would be immediately after a 'crash', rather than switching on the 'high'.

    • Just hang on a sec. I'll look into my crystal ball.

  • +3

    If I'm 43 years old and risk adverse it would still be unwise for me to reduce the 20 years of growth, just because I'm afriad the market won't recover tomorrow's crash in 20 years time.

    Edit: have to re-read your post to see the 2 year switch. can you see you are hoping to gain from the market collapse, rather than protecting your super?

    But do whatever you want you with your super. No rules to break. Put it in Etherum for all I care.

  • +5

    Where has Warren Buffett predicted a 'massive collapse'?

    In respect of your conservative/defensive position, what's wise is your relative to your own risk profile. Theory suggests you're young enough (43) to ride out the greater volatility that a more growth oriented strategy will experience, in exchange for the greater returns. But if small jumps and drops in the day to day/week to week/ month to month value of your portfolio make you nervous, and bigger falls are likely to make you sell out in a panic, perhaps defensive and conservative is the right strategy for you.

    One option is to read a little more widely about asset allocation and learn more about diversification, about the risks involved in growth v conservative strategies, with the aim of becoming more comfortable with a bit more risk in your portfolio. Going defensive/conservative has historically underperformed more aggressive strategies, but it's all academic if having a more growth oriented/more volatile mix keeps you up and night worrying.

  • +1

    You'll need to delve into the actual asset classes in the conservative and defensive options and you might find that equities will still be large portion of each. See if you are comfortable with that because every time there is a large market correction, all asset classes will fall so there's no where to hide except in cash. If you are risk adverse, see if your super fund offers investments that have downside protection. These funds will not do as well when markets are doing well because they give up some of that upside to buy protection for when markets fall and they tend to make the surveys you quoted above.

  • +2

    Am I Wise

    Those that ask are obviously not wise.

    Pull up a 35 year chart for global index and you will understand it is time in the market not timing the market.

  • +6

    Historic returns and your time remaining indicate your decision is not prudent. I'm going high growth all the way, plus into retirement. It's not like I'm going to spend everything in 2 years.

  • +2

    timing the market does not work for 99% of us. plenty of people pulled their super out at start of covid in anticipation of a more severe downturn and missed the huge bounce after. if you have a long term horizon i'd keep it in high growth, or balanced if you are risk averse

  • +2

    I don't think you're wise or unwise.

    Everything is a high chance of taking a hit eventually over the next 2 years - the value of money, shares, and property.

    Most people are trying to figure out what's going to take the biggest hit. But nobody knows.

    Personally I am diversifying through a balanced fund.

    If I had the means I would probably buy property in Turkey as the lira has tanked. There is a decent chance they will eventually (after years) get things back under control and it would be a good investment in that case. In practice I don't have the means and best I can do is invest in a Turkish Netflix subscription.

    • lira tanking doesn't necessarily mean property will be cheaper though.

    • Even if property tanks by 20% it will take it back down to pre-covid levels, so not exactly falling off a cliff

  • +1

    The Global Banking Crisis

    davelarz on 14/05/2016 - 09:08
    Good morning everyone. Am I just being paranoid or is there an actual possibility the banking system could collapse?
    https://www.ozbargain.com.au/node/247862

    Contrarian investors get rekt more times than they're right.

    • +1

      Good detective work

      OP I think you should leave it alone - if you're being emotional about investing then what's to say you'll ever think its the right time to jump back into high growth? You might see a 20% drop and freak out thinking there'll be more of a fall but there isn't and then you've missed out again. Trying to time the market means you need to get 2 decisions right - when you get out and when you get in.

      Lets say you switched now to your plan and markets continue to march higher by 30% before crashing 20% - even ignoring the issues with timing your re-entry - well done you've still ended up in a worse position.

    • Contrarian investors get rekt more times than they're right.

      totally, and look at bitcoin or crypto, its crashing don't go contrarian and buy any, or you'll get rekt

      • https://www.ozbargain.com.au/comment/11632326/redir

        I buy cheap assets from people like OP.

        "Bulls make money, bears make money, pigs noobs get slaughtered".

        • Yea I can tell you’ve totally sold all your crypto and gone into fiat and waiting for the dog to chase you as you say, BTC going to $100 soon ey!

  • Do they have a property option? All property and land value goes up over time.

    • Does super buy/sell residential properties?

      Last I read up they do commerical leasing, and investment returns come from rent.

      • depends on the type of REIT, there's retail/office/residential/mortgage or mix of same

        • But they don't buy/sell residential properties as their primary source of investment return.

          They might hold funds in mortgage lenders, so indirectly receive income through residential asset type.

          "Land value goes up over time" has less to do with the risk of this investment type. The interest rate, rent rate, lease vacancy has lot more to do with it. I'm sceptical this is wiser investment option for OPs over the next 2 years compare with the conservative/defensive mix.

      • Theres other types of property such as shopping centres and industrial. We have Woolworths and Coles as tenants (my fund)

  • Why do you think the market is going to crash? Yes I think it might dip bit not crash

  • Take a look at your property options. I switch between 100% property and 50% international shares with the other always in property. NEVER Australian shares. I switched to 100% property in November and got a lucky break of 7% since then. This year is gonna be tough for awhile at least so being conservative isn’t a bad idea. I use the VIX - Volatility index - as a guide (ticker code ^VIX) if it’s not stable then conservative is a must, if it’s steady and under 17 you can spread your risk with reasonable confidence. Over time this is a good strategy. Property and shares tend to follow a similar path in the graphs over time and property won’t have the same bumps that shares do. If I was setting and forgetting I would always have at least half in property.

    • +1

      Would you also recommend putting it all on black?

      • No!! That’s clever though. I get it🤣🤣🤣

    • Should I Google the volatility index, or can you suggest a website? Thanks.

      • It’s just like any international share ticker symbol. You can get live updates on Yahoo finance. I use the Stocks app on my iPhone.

    • This is risky advice. Leave your investment plan to a professional that has access to a large range of information. Property may not crash often but it can happen and the current Chinese real estate crisis could be the catalyst.

    • Why never Australian shares?

      • -1

        Australians don't have enough fiat money to pamp it like the Americans.

  • +1

    This is a super bad move because conservative = cash. With inflation on the rise from all the COVID money printing your super is going to lose value. As others have stated, at age 43 you should be preset on maximum growth.

  • Wrong move OP. If it aint broke, don't try and fix it.

    You have time on your side. Stay semi-aggressively invested. eg. 50% international shares, 30% Australian Shares, 20% balanced.

  • I'm 60 and still aggressively invested.

    Retiring next Friday and will set up a retirement income stream that will still be aimed at some growth.

    • 🎉 on your escape from the 🐀 🏁.

    • Exactly, why stop investing for growth just because you reach 60 and retire?
      The urban myth that you need to become more conservative with your investments as you age just doesn't stack up for me.
      Many people will spend 25 years retired - great chance to invest, grow and have a bit of fun doing it.
      And if you're good/lucky at it, leave a bit of a legacy behind when you're gone

  • +1

    I have had some time to think now. I think it might be best to change strategy to high growth and buy more shares if the market falls. It was a silly move in the first place. Since I am invested long term I am committed to not panic selling and staying the course no matter what. The question now is should I change back straight away or wait a few months and see what happens?

    • +2

      Professional traders get it right about 60% of the time. People that don't trade for a living have no chance of timing the market.

      Don't try and complicate things.
      Buy > hodl > dip > buy more > hodl > retire.

      • +3

        Agree - the old saying goes that trying to predict the best time to invest is like trying to catch a falling dagger.

  • +3

    NO… you are not. It will never grow.
    I made thousands over the pandemic in placing everything in High Growth.
    Whilst many panicked and opted out to safe havens, I went the other way and rode the escalator up from the bottom to the top.

    • Nothing worse than a brag post

  • There's a high probability of a stock market crash this year, but we haven't had what I would call a major crash for years and I think we're over due for a big crash, having said that, it's impossibly to predict when to move your money. I've researched and pondered this for years to no avail, it's best to just have a good mix of assets in your portfolio and keep some cash aside for opportunities. I've made all my money back since the covid crash of 2020 and more, and I have a fairly aggressive portfolio (at least the large jumps and slides are fun to watch).

  • Am I Wise to Have Switched My Super to Conservative/Defensive?

    At your age, no, that's probably a bad move

  • +2

    money management is really up to individual circumstances, risk tolerant and at where you are currently standing in life in regarding to your age and life style

    there is no right or wrong answer, because no one can predict the future with any degree of certainty else they all can be very rich very quick
    and all the economist with their charts and economy prediction can all becomes multi-millionaire and there are not many economist millionaire said it all

    it all up to you and what makes you sleep well at night and be comfortable with that decision, don't FOMO, don't get into things you have little knowledge
    a lot of people can gloat on the internet but you don't know their true performance nor their circumstances so best to ignore

    Good luck with whatever decision you end up making

  • Let's rub a crystal ball….

    Go seek financial advice for your own personal circumstances, would be my suggestion.

  • Market is falling. Still haven't switched back to high growth. Decided to wait until March. 2.5% drop in ASX today and inflation is up up up!

    https://amp.abc.net.au/article/100781236

  • So pleased I switched my Super to property in November when the VIX started to show signs of volatility. Currently my super is at an all time high unlike the stags out there really feeling the pain right now.

    • -6% is pain? Pain for ants, may be.

  • Elon Musk wealth is down 9 percent this week. Tech sector not happy.
    https://www.bloomberg.com/news/articles/2022-01-21/bezos-los…

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