2019 is almost over and if it’s judged from an investment market perspective, it will go down as a good one. A significant contrast to 2018, or the last quarter of 2018, where markets moved viciously south.
As we said at the time, “like every other correction this will likely pass. Markets price information in, they adjust and eventually move on.” And they did. 2019 has been the best year for equity markets since 2009. Does it say anything about the future? Nope. Should you be more confident? Nope. Great highs and screaming lows are a reminder to maintain focus and remain calm. Stay balanced and diversified. It’s the best way to steer ourselves through whatever investment markets throw at us.
As one client was heard saying in our office this year, “You have a good year, you have a bad year, who cares? That’s the markets!” He then proceeded to talk about life with his adviser for the next hour. You might say he has his priorities straight, but we’re all happy when the market’s up 20%+ in the year.
Speaking of ‘talking to your adviser’, as the year rounded out, we found another reason why you should do it because where else will you get a straight answer on financial matters? APRA recently released a heat map to assess superannuation funds. It drew commentary from various sources, but this from one of Australia’s best-known financial journalists, Alan Kohler, we found alarming.
The average annual net investment return over the five years to June 30, 2019 was 7.28 per cent — which seems OK, except the ASX 200 index returned 8.77 per cent per annum compound over the same period. The difference is 1.49 per cent. The average MySuper fee is 1.4 per cent, so the industry managed to produce the stockmarket return minus fees. Thanks for that.
Kohler’s implication is the superfunds should be outperforming the ASX 200. Kohler either doesn’t know what he’s talking about or he’s being willfully misleading. Unless a superfund invests solely in the in the ASX 200 they can’t be compared against it on a performance basis. They hold a variety of assets including cash and fixed interest, so it’s basic common sense they would underperform an equity index. Superfunds also pay tax, the ASX 200 doesn’t. This is similar to our previous criticism of superfunds for having high weightings of risk assets, but claiming they are balanced.
As we’re in heading into the holidays, you might think of two families driving to two different holiday destinations in two totally different cars and then comparing their fuel usage and time to get to their destination to draw a conclusion. Impossible.
It gets worse. One of Kohler’s colleagues at The Australian, Michael Roddan, raved about the quote on social media, calling Kohler’s column ‘excellent’, suggesting the comparison highlighted the failure of the superannuation system.
Does Roddan report on the arts or rugby union? No, he reports on banking, financial services and yes, superannuation. One wonders how it’s possible to report on superannuation without understanding the basic concept of risk and return or benchmarking?
And The Australian newspaper’s tagline is “For the informed Australian”. Want to be informed about financial matters? Talk to your adviser.
Our Best of 2019
Don’t Go With The (Out)Flows During A Correction Tempted to bail when the markets get wild? A sports star offers more wisdom on rough markets than fund managers.
A Healthy Investment Experience Financial stress can have an affect on brain function. What’s the best way to ensure you keep your financial journey a mentally healthy one?
The Monopoly on Uncertainty Think we’re living in unprecedented times? We’re wired to think so, but it’s probably not the case.
Where There’s a Will, but Not a Way A decade long estate battle highlights the value of an independent executor.
Five Lessons From Goldsky When the Goldsky Ponzi went belly up, many lost everything. We offer five lessons that can be applied to spot a fraud.
Making Evergreen Financial Decisions & Lightening The Mental Load A two part piece on age related cognitive decline and decision making under stress. How do you ensure neither derail your financial life?
The Legacy of Unprofessionalism A man writes into the newspaper looking for some financial advice. Likely because he believes he can’t trust the professionals.
Other stories to read over the holidays
Stay in The Game A young man persists through dark times and just as things are turning, he’s dealt another blow, but a stranger steps in to help.
Meet the Money Whisperer to the Super-Rich NBA Elite We regularly hear stories of sports starts going broke, one man is doing his best to stop that happening.
Why Don’t Rich People Just Stop Working? Are the wealthy addicted to money, competition, or just feeling important?
A final message from T. Boone Pickens Legendary oil man T. Boone Pickens wrote a final message before his passing this year.
52 things I learned in 2019 A list of interesting and odd things one man has learned in 2019.
Finally, we had a great response to our ‘full story’ video. Clients who saw it could only agree they hear little from the media when the market is moving upward, but it’s pessimism on full blast when the market moves down.
With that, the MFG office will be closed from Friday 20 December at 5pm and we will reopen on Monday 6 January 2020.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
