Super, a home, and the Pension … a fruity mix! – and February 2024 – End of Month Update

Even Superman has his limits – Is it Kryptonite OR Brussell Sprouts?

Slack Investor writes a lot about Superannuation because it is a fantastic component to have in your armoury to establish financial independence – in a tax-effective way.

The ultimate aim for Slack Investor is to fund your own retirement, but in reality, according to the Association of Superannuation Funds of Australia (ASFA) estimates, a minority (43% ) of Australians of retirement age would be self-funded by 2023 – this percentage should increase as the compulsory superannuation system matures.

On 31 March 2023, 63% of the population aged 65 and over were receiving the aged pension (full or part), or other government-funded income support.

As so many Australians rely on a mix of both their super and the aged pension for retirement, it is worth revisiting the perverse ways in how superannuation interacts with the pension under the Assets test devised in 2017.

Your own Home

Before we get to this mix, by the time you retire, you do want to have a place to live and be free of landlords. This may sound impossible to some at the moment – but it is a vital part of financial independence. It can be a “tiny home”, an apartment, a place in a regional area …. as long as it is yours!

Tiny Homes – This 20 sq m little bewdy will set you back $32 000 – however, you still have to find land for it – and connect to services.

It is so important to aim to own your own home by the time that you retire – even if it is a 1-br apartment. Admittedly, this is so much harder than it used to be! Looking at the figures below, it is vital to get as large a home deposit as you can to reduce your borrow amount – this should be one of your early financial goals. However, without help, a multi-bedroom home near a capital city now seems near impossible.

If you dont have a deposit, October 2023 data showed that Australians need an income of more than $300,000 a year to buy a median priced home. Household incomes required were considerably less, but still “eye watering”, for outer suburbs and regional cities. e.g. Geelong $243,333, Brisbane $223,333. Apartments are usually less expensive – and require less income to service the home loan.

Things are really bad at the moment for future home owners. It was assessed that for the home market to “affordable” home prices needed to be on average 3.0 times the average median income. Currently, Australia’s housing market has a median multiple of 9.1! I am hoping that future governments will adopt policies that will reduce house prices – But I am not holding my breath.

Super and the Aged Pension

At its most basic level, superannuation is forced retirement savings for all working Australians. A compulsory contribution of 11.5% of your salary (from 1 July 2024) that will compound till your preservation age (between 55 and 60).

According to Treasury projections, about 60% of retirees will have less than $250 000 in super in 2024. This amount of super is not enough to fund a comfortable retirement. $250 000 in pension mode at the official Age 67 drawdown rate of 5% generates only $12 500 income per year. Clearly, many Australians will need to rely on a mix of their super and the aged pension for retirement income. The Aged Pension is available to Australians over 67 – but, it is means tested.

The bare minimum to aim for is the “sweet spot” in the aged pension asset test where your assets are a bit more than the maximum allowed for the full pension. Under current rules (2024), home owning couples can have $451 500 in assets (singles $301 750) and still qualify for the full government aged pension (at age 67).

In 2020, the Alliance for a Fairer Retirement System pointed to a super sweet spot of around $400,000, which can see a pensioner (home-owning) couple “earning $1,000 a month more than a couple with $800,000 in savings.”
Nicola Field (Using data for 2020/21)- Canstar

The first chart shows 20 different amounts of superannuation that you might have saved up by the time you are ready to retire – ranging from $150 000 to $1 100 000 above chart – from saveoursuper.org.au.

This next chart is far more interesting, it shows your total income from different amounts of superannuation (shown in the above table) mixed with the aged pension – for a home owning couple. For simplicity, these tables assume your only non-home assets are in super and the aged pension rates were those applicable in 2021 ($34 777 per couple). The essence of the table is still valid.

Total amount of retirement income – **for a home owning couple** – Combination of Part-Aged Pension (orange) and 5% of Superannuation Balance (Blue) for each of the 20 amounts of Superannuation Balance shown in the first chart (Using data for 2020/21)- saveoursuper.org.au

Bizarrely, there is a point on the total retirement-income (couple) table corresponding to around $400 000 in assets/super where an increased assets/super balance does not lead to an increased total income due to the asset test pension taper rate. Above that point, for those on the part-pension/super mix, the more super you have, your total income actually goes down. This strange anomaly exists for assets/super between $400 000 and $800 000 (2021/2020 data).

Clearly, the current assets test to qualify for the aged pension is unfair and provides a disincentive to save -and should be changed. But, until then, a major retirement goal is to use your super to get your total assets to near the sweet spot before you reach age 67.

(It)is not fair that people who forgo consumption and save more to increase their living standards in retirement and reduce their reliance on an Age Pension should instead get less retirement income. This is the perverse outcome for a large range of savings under the 2017 assets test.
Jack Hammond and Terrence O’Brien – saveoursuper.org.au

How the Assets test works (in real life) for the aged pension (2024 Data)

According to Services Australia, for the aged pension, assets are property or items you or your partner own in full or part – this does not include your home! It does include Financial Investments (Bank accounts, shares, managed funds, annuities, etc), Personal assets (Home contents and vehicles), Superannuation and Real Estate.

I had a recent example of filling in an assets form for a close relative. Her bank statements and investments were easy to quantify. We were advised that personal assets should be valued according to what we could get if we were “keen sellers”. It was suggested to us that, other than vehicles, most peoples personal effects would amount to between $5000 and $10 000. This proved to be near the mark as most furniture and home items end up having to be donated when finalizing a deceased estate.

For the table below, the aged pension and asset limits are current values* and correct at February 2024. Using 2024 data, the “sweet spot” for assets is now near $451 500 for couples ($301 750 for singles). If you had $250 000 in super, and your “other assets” added up $60 000 (Car $13 000, Bank Ac’ts/Shares/Funds $35 000, Home Contents $12 000). Your Total assets would be $310 000.

For a couple with similar “other assets” and a combined super of $400 000, your total assets would be $460 000.

Situation	Asset Limit	Other Assets*	Super	Drawdown from Super @ 5%	Age Pension	Total Income
Single Home-owner	$301 750	$60 000	$250 000	$12 500	$28 514	$41 014
Couple Home-owner (Combined)	$451 500	$60 000	$400 000	$20 000	$42 988	$62 988

Table based on a single home-owner with $310 000 total assets ($60K + $250K) and a couple home-owners with $460 000 total assets ($60K + $400K) – using Feb 2024 values for the Aged Pension and Asset Limits.

Using this mix of super and the pension, when reaching the pension qualifying age , a modest to comfortable retirement is possible under current rules when you own your own home. Also, under the Work Bonus Rules, singles can earn up to $5304 (Couples $9360) in a part-time job without affecting their aged pension.

Comfortable lifestyle (p. a.)	Modest lifestyle (p. a.)
Couple $71,723	Couple $46,620
Single $50981	Single $32,417

ASFA calculated annual retirement requirements for those aged 65-84 (September quarter 2023) for both “comfortable” and “modest” lifestyles

February 2024 – End of Month Update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

Little movement this month for the ASX200 (+0.2%) – but, it is testing new all-time highs. Nothing happening with the FTSE 100 (0.0%) at the moment.

The S&P 500 (+5.2) and the NASDAQ 100 are hitting new record highs and Slack Investor is pleased to go with the momentum but remains nervous for these markets.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

2023 – Hope You Were Strapped In … and January 2024 – End of Month Update

Slack Investor usually just assesses stock market returns at the end of the financial year. However, calendar year 2023 was some ride.

The 2023 ASX 200 Chart

For the 2023 calendar year, the ASX 200 Index started at 7020, and ended up at 7590 – a 12-mth increase of about 8% – but, on the way, it fell to a year low of 6751 – a temporary fall of 3.8%.

Of course, If you did not look at the charts daily, these fluctuations would mean nothing. If you ony looked at the Australian Index at yearly intervals, 2023 would probably bring some joy. As well as the overall 8% gain for the year, when you include dividends, the ASX 200 Index total return for calendar year 2023 was 12.2%. The ASX “All Ordinaries” Index (Tracking Australia’s largest 500 listed companies) had a total return of 13.0%.

Slack Investor will again emphasize the joy of investing and mostly doing nothing – and trying to focus on longer term returns. One of the best summary charts I have seen for a while that shows calendar year returns has just been updated and published by Ashley Owen. Ashley uses the “All Ordinaries” Index rather than the ASX 200 Index- as there is more historical data available for comparison.

Total ASX “All Ordinaries” calendar year returns – with the the last 5 years highlighted – From Ashley Owen – Owen Analytics – (Click to Enlarge)

The first thing that jumps out in this chart is the amount of “Green” positive years vs the “Red” negative years. In 78% of calendar years, ASX Index returns are positive. The overall average total return since 1900 for the Australian “All Ordinaries” Index is 11.7%.

Inflation has been the topic of the day lately and Owen has kindly provided his calendar year chart in terms of Real Returns for the All Ordinaries Index – The total return minus the inflation rate (Consumer Price Index (CPI)). A certain amount of cash is worth holding to for liquidity – so that you can avoid selling stocks in a market downturn. Although cash can iron out some of the stock market fluctuations, being invested in cash is not a protection from inflation.

Total ASX “All Ordinaries” calendar year “Real” (minus inflation) returns – with the the last 5 years highlighted – From Ashley Owen – Owen Analytics – (Click to Enlarge)

Adjusted for cpi increases, the overall average “Real” total return since 1900 for the Australian “All Ordinaries” Index is 7.9%. Slack Investor is willing to put up with the volatility of share markets for an average “after inflation” return like this.

For financial independence and as a hedge against inflation, it is important to own growth assets – such as the Australian Share market. Sure, there will be the occasional negative annual returns ahead … but let’s not worry about this while the Australian stock market is rising. Long-term overall results are the important thing.

January 2024 – End of Month Update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

After a big Christmas Rally, things have settled down a bit with modest gains for the ASX 200 (+1.2%) and the S&P 500(+1.6%). The FTSE 100 had a small fall ( -1.3%)

It was time to adjust the stop loss for the S&P 500 as the current value is over 15% greater than the stop loss. Slack Investor has long believed the US market is overvalued and, while enjoying the journey, is happy to have his stop loss a little tighter. It is difficult to do the adjustment on the monthly chart, so I had a look at the weekly chart for the S&P 500 below. I am looking for a dip in the chart that represents a “Higher low”. The new stop loss now stands at 4682 – only 3% below the current value.

Extract from the S&P 500 weekly chart – From Incrediblecharts.com

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Savings Rate and … December 2023 – End of Month Update

My last post on “Salary Sacrifice” got me thinking on the other things that I did to help myself on the journey towards financial independence. I have before stressed the importance of your savings rate as the primary tool in the box – and, more than anything, this is the number that will affect when you become financially independent.

This figure can be calculated a few ways, but for simplicity, let’s define it as your retirement savings as a percentage of your take-home pay (disposable income after taxes and deductions) – this can be calculated using fortnightly, monthly, or yearly data.You can work out your own savings rate or, if you are in a stable relationship with a combined goal, include your partner’s savings and take-home pay.

SAVINGS RATE (%) = 100 x (Total amount of Savings put aside for Retirement/Take-home Pay)

This savings rate is the percentage of your after tax income that you must be putting towards retirement – and it defines the number of years that you have to work until you can sustainably generate your expenses from your investments. There are some assumptions for the following chart:

Your investments earn 5% after inflation
You can live from the “4% safe withdrawal rate” after retirement.

This magical curve is presented below to bring a bit of clarity to your goal. The object is to get to the stage when your annual return on investments (Passive income) cover 100% of your expenses. This represents the beautiful state of financial independence.

From The Escape Artist – using the conservative assumption of a 5% return on your retirement portfolio after inflation.

In Australia, with compulsory superannuation, 10% of your gross salary is deducted from your wages. Taxation rates will vary, but lets just say that 10% of your gross salary is the equivalent of about 15% of your net salary (disposable income). You add your superannuation to any other retirement saving that you are doing to get your total amount of savings put aside for retirement.

Starting from scratch, from the above graph, if you worked continuously, and only relied on compulsory superannuation you enter the full-time work force and you are 42.8 years away from a retirement – where your living expenses are covered by the passive income from your retirement savings. In other words, if working continuously, a 22-year old starting full-time work will have enough passive income to cover expenses when reaching the age of 64.8 – relying solely on compulsory super.

In Australia, there is also the aged pension to kick things along after age 67. Obviously, if you want to retire sooner and have a bit extra for holidays, and to allow a bit of a safety margin, and be financially independent – You will have to do some extra savings towards retirement yourself.

How are people going with their savings rate?

For Australians, the compulsory superannuation system provides a sound base for retirement savings (with a working life of 42.8 years). This doesn’t factor in the government funded aged pension – subject to a means test. Currently the pension (September 2023) is $28,514 per year for a single person – But who knows if this will still be available at present levels in the future. It is best to plan for your future without it – and then accept it as a bonus if you qualify.

Although this sounds OK, any disruption to your working life (ill health, family, education, retrenchment, etc) will be a real setback to your retirement plans – Any work breaks will require additional savings for your retirement. In the US, the “average” savings rate was between 5-10% for many years. Despite some impressive savings rates during COVID-19, in July 2023, the personal saving rate in the United States amounted to 4.1 percent.

Statistic: Personal savings as a percentage of disposable income in the United States from June 2015 to August 2023 | Statista

From Statista

You would have to say … this does not bode well for a satisfying retirement for the “average” US Citizen.

What was the Slack Investor Savings Rate?

Rusted on followers of this blog will recall that I had a bit of a delayed start to thinking about retirement. I had just arrived back in Australia after a 6-year working holiday overseas. I was aged 30, broke, and the only thing I knew was that I didn’t want to continue working in the field that I was trained in – high school teaching.

Clearly Slack Investor had a bit of work to do. Once I was in regular employment again, I set about getting the financial building blocks in order. Emergency fund, house deposit … and then savings for my retirement. I did this mostly using salary sacrificing into superannuation and building up my own private share portfolio.

There is nothing Slack Investor likes more than burrowing into my financial history using the excellent and free “Sunset” international release of Microsoft Money. I use the Australian Version. I have been using this software to track my finances since 1990 (33 years!)

Including superannuation contributions, my savings rate for retirement fluctuated between 20% and 45%. From the top graph, this represents a shifting rate that was equivalent to an overall retirement goal that required between 36.7 years and 19 years of working. Since “ground zero” at aged 30 and some extra education, I ended up working mostly full time for 28 years. Luckily, I had found a job as meteorologist that I really enjoyed.

This is not the “hard core” road to financial independence (i.e retire at 35, etc) – but Slack Investor thinks a reasonable compromise with the competing priorities of raising a family and buying a house.

Savings Rate is so important. Determine what your own savings rate needs to be to achieve your retirement goals – and automate your savings deductions as much as possible – and get cracking!.

December 2023 – End of Month Update

Happy Days. The year closes and, Slack Investor was definitely not naughty … a big December “Santa Rally” this month. All followed markets rose. The ASX 200 up a mighty 7.1%, the FTSE 100 up 4.0%, and the S&P 500 up 4.4%,

Slack Investor remains IN for the FTSE 100, the ASX 200, and the US Index S&P 500.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Looking Forward Looking Back … and November 2023 – End of Month Update

Usually not much of a country and Western Fan, but Slack Investor is quite taken with this video of Slim Dusty in his rendition of Looking Forward Looking Back – where two Australian Music Legends (Don Walker and Slim Dusty) combine to make this beautiful Australian song. Slim must have been about 73 when this song was recorded in the year 2000.

Making sense of what I’ve seen
All the love we’ve had between
You and I, along the track
Looking forward, looking back
Looking Forward Looking Back – Don Walker (composer) (1951 – ) & Slim Dusty (vocals) (1924 – 2003)

This song is bitter-sweet to me as it was played at a good friend’s funeral … and I always get a little sad .. but then, I think of the good times I shared with my friend. My friend was also a keen investor and, I’m sure he wouldn’t mind me using this song to launch this post. It is a song of reflection … with a reminder to look forward as well.

Slack Five-Year Individual Share Performance

Though Slack Investor reports on his results on a yearly basis, the annual Nuggets and Stinkers post is a constant reminder of how, in successive years, a company can be “a nugget” … or “a stinker”. The market will often go in trends of overvaluation followed by a period of undervaluation – and the true measure of how the stock has performed is lost in these constant tidal changes. For my purposes (Slack!), a 5-yr measure of performance is about right – as this allows for the true performance of a quality stock to shine through.

I trawled through the Slack Portfolio to find stocks that I had owned for 5 years. I was suprised to find that, of my current 22 individual stocks or ETF’s that I own, I had held only 5 of these for 5 years. This is not what I expected from a Slack Investor and I had to drill down into the portfolio to realize that I had given my portfolio a big shake-up about 4-5 years ago. I had retired, injected a large portion of my work super into my SMSF, and also sold a few stocks to make way for a house purchase.

The 5 stocks that I had 5-yr data on were Altium, Macquarie Group. REA Group, CSL and Codan. The 5-yr Internal Rate of Return (IRR) figures give an “average” annual return for the 5-yr period and include dividends as well as any stock price growth. The results below, for the five years up to 30/06/23, are from my financial software – the free “Sunset” international version of Microsoft Money Australian Version. There are IRR calculators and Compound Annual Growth Rate (CAGR) calculators also available online. I have also included the CAGR Total Return (TR) till 30/06/23 for each of the Slack followed markets (in bold) for reference.

Stock	Symbol	5-yr IRR
Altium Ltd	ALU	14.8
Macquarie Group Ltd	MQG	12.7
S&P500 (TR)		12.2
REA Group Ltd	REA	11.3
CSL Ltd	CSL	8.4
ASX200 (TR)		6.3
FTSE100 (TR)		3.8
Codan Ltd	CDA	3.3

Digesting the above table, Slack Investor is generally pleased with the annual IRR over 5 years of the majority of held stocks. The exception is Codan (CDA) which has had a roller coaster ride in the price charts (see below) – and underperformed the ASX 200 index over 5 years. This stock needs further evaluation to see if I should continue to hold it in the Slack Portfolio.

There are strange days
Full of change on the way
But we’ll be fine, unlike some
I’ll be leaning forward, to see what’s coming
Looking Forward Looking Back – Don Walker (composer) (1951 – ) & Slim Dusty (vocals) (1924 – 2003)

I go to Market Screener Financials page for Codan to quickly see that the income for CDA is projected to increase for the next few years and the company is in a solid financial position. The projected Return on Equity (ROE) remains above 15% and, despite the dramatic price fall during 2021/2022 over earnings downgrades, the companies price trend so far in 2023, has been positive. This holding is currently on “watch” – but I remain a holder of CDA for now.

5-yr Price Chart of Codan (CDA) – from Investing.com

November 2023 – End of Month Update

Slack Investor is IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

Due to a strong rebound this month Slack investor has cancelled his SELL Alert for the ASX200 that started at October 31 2023 due to a stop loss breach – and he now remains IN .

All Slack Investor overseas followed markets had a bumper month. The S&P 500 led the way with a massive rise of +8.9 %. More modest rises for the FTSE 100 +1.6% and the Australian stock market – the ASX 200 +4.5%.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Corrective Lens and … October 2023 – End of Month Update

Last week, the ASX 200 has moved into correction territory to its lowest point since October 2022. Both the S&P 500 and the NASDAQ Index are already in technical corrections. The FTSE 100 is faring marginally better, down around 9% from its recent peak in February 2023.

In the world of stock markets, a 10% decline from a previous peak is known as a “Correction”. Never a nice time … but Slack Investor recommends that you just put on the big pants and get used to these things. Corrections are just part of the landscape of investing in shares and Slack Investor has often written about them – and the need to roll with them – if you are using stock markets to better your financial position.

On average, the (US) market declined 10% or more every 1.2 years since 1980, so you could even say corrections are common.
For the S&P500 – Covenant Wealth Advisors

In the Australian market, falls of 10% occur (on average) every two years – and can occur even more frequently.

If you can avoid it? – Don’t Sell

Throughout my investing career, I have been a net buyer of stocks. Selling only to raise some cash, or to shift out of one stock into a (hopefully) better performing one. Things are much the same in retirement – Though I seem to be trading less.

I have structured my portfolio into a stable income pile and the more adventurous investment pile. My living expenses are easily covered from the dividends from the investments pile and income from the stable pile. So I never have to sell shares when their value is discounted during a correction (>10% fall) or a crash (>20% fall).

This way I can reap the benefits of long term growth in the sharemarket. The data from 97 years of following the S&P 500 Index with a balanced (60% shares:40% bonds/cash) portfolio shows that, over a 5-yr period, the portfolio will outperform inflation 84% of times by an average annual amount of 5.48%. Holding the portfolio for 15 years, it has been ahead of inflation by 5.33% on 97% of occasions. Slack Investor would take those odds.

Balanced Portfolio – Long-term returns over inflation (US) – From Bob French – Firstlinks

Not for the faint hearted, but you can (historically) get an increase to returns by taking on more risk with a 100% shares portfolio. When calculated over a 15-yr period, The S&P 500 has been ahead of inflation by 7.08% (average p.a.) on 95% of occasions.

S&P 500 Long-term returns over inflation – From Bob French – Firstlinks

In light of the above two tables, Slack Investor shows indifference to these corrections … be patient – you will be rewarded.

October 2023 – End of Month Update

Slack Investor remains IN for the US Index S&P 500 and the FTSE 100. But is on SELL Alert for the Australian index shares – as the end of month stock price (6780) is below its monthly stop loss of 6917.

Slack investor is on SELL Alert for the ASX200 at October 31, 2023 due to a stop loss breach. I have a “soft sell” approach when I gauge that the market is not too overvalued. I will not sell against the overall trend – but monitor my index funds on a weekly basis.

Another negative month for Slack Investor followed markets (S&P 500 -2.2 %, and the FTSE 100 -3.8%, and the Australian stock market did the same (ASX 200 -3.8%).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Retirement Fees … and September 2023 – End of Month Update

Tax collectors – Marinus Van Reymerswale (c. 1490 – c. 1546)

The ruthless faces of the tax collectors depicted by Marinus Van Reymerswale do not ring true to Slack investor. These days, tax and fee collectors sit smugly behind desks as the fees and taxes roll in. Don’t get me wrong, Slack Investor is pleased to pay his fair share of tax … but excess fees for investing, that’s another story.

Most people have money in a super fund during their working life – this is normally known as an Accumulation Fund. When they retire, and the money can be released, they rely on this saved money to pay of debt – or fund their retirement. It is usual practice that you ask whoever runs your super fund when it is accumulating to also run your retirement fund – that pays you a pension at regular intervals.

For a fee, the super funds take care of the “back end” of this retirement fund – where your money is invested and all the administration for the fund. The Super provider sets up a new account within your super called an Account Based Pension (ABP). There is a great advantage in doing this as all earnings from from money transferred to this pension part of the fund are tax free if you are over 60. At 60, Slack Investor converted all of his accumulation funds into an Account Based Pension.

Naturally, Slack Investor is all for minimising these fees. Lets have a look at some of my favourite industry funds (Low cost high/performance) – Australian Super, Hostplus, UniSuper, and HESTA. Using the Chant West AppleCheck online tool available through the Australian Super site we can compare what they charge for running an accounts based pension.

For comparison, I invested our hypothetical ABP in the “conservative growth” option (21-40% shares) on all funds. This is usually the least risky of pre-mixed types of investments – and might be favoured by retirees. There are more other pre-mixed options that have better long-term performance – but these other options have more volatility. I have shown below the fees on a $550K account comprising of a $500 000 Account Based Pension together with a smaller $50 000 Accumulation account that you might have still running for any extra contributions.

FUND	10-yr Perf (%)	5-yr Perf (%)	Fees 500K Pension	Fees 50K Accum.	TOT Fees 550K
Australian Super	5.1	3.5	2602	322	$2924
HostPlus	4.7	2.9	3043	404	$3447
UniSuper	4.8	3.5	2696	356	$3052
HESTA	5.4	4.3	3152	362	$3514

The more you have … the more they charge.

Looking at just the cheapest of the above Industry Super providers, Australian Super with a pension account of $500K, $1m, and the current maximum amount for an accounts based pension $1.9m – again using the Chant West AppleCheck online tool.

Australian Super	Fees – Pension	Fees 50K Accum.	TOT Fees
$500K Pension Fund	2602	322	$2924
$1m Pension Fund	4802	322	$5124
$1.9m Pension Fund	8762	322	$9084

You could argue that these fees are reasonable, at around 0.5% of your invested funds, as there are inherent costs in investing and responsibly administrating these large amounts of money. Take the time to check what fees you are paying on your Super fund – and compare with a low cost/high performance fund using the AppleCheck tool – it might be time to switch funds!

Comparing Retirement fees with SMSF funds

Slack Investor is a great fan of the Self Managed Super Fund (SMSF) but recognizes that it is not for everyone – you must really be prepared to put a lot time and thought into the SMSF for it to be successful. To save on costs, rather than divesting responsibility to an accountant, Slack Investor uses a low-cost (no advice) provider and takes on a lot of the administration duties and investment responsibilities himself.

Unlike the Industry funds sliding scale for fees, a significant advantage in SMSF funds is that the costs are fixed – no matter what amount you have. For the 2023 financial year, Slack Investor’s costs through his provider eSuperfund were.

Task	Amount
Admin and Audit Costs (eSuperfund)	$1,330
Brokerage (10 trades)	$300
ETF Fees	$2,300
Time (50h@$50)	$2,500
TOTAL	$3,930

In the above example of annual fees, I have tried to include a charge for my own time at a nominal 50 hours at $50 per hour. On average, a hour per week. Most weeks I wouldn’t spend any time on my SMSF but, around tax time, and when making decisions about buying or selling, pensions, or contributions, I would spend a few hours thinking or researching. Annually, 50 hours is a fair approximation. I would gladly perform these tasks for free as finance is an interest and a hobby, but I’ve included them above to make a proper comparison – as not everyone is a Slack Investor.

Running an SMSF, because of their fixed costs makes more sense with a large super fund (>$500K). However, at the core of any successful self-managed fund (SMSF) is the amount of time and effort that the trustees (you, and other members of the fund) are willing to put into it.

Given the all the above data, it could be better, but the amount of fees that a good industry fund charges to run your pension seem reasonable at around 0.5% of funds under management. Slack Investor hopes that competition and transparency should gradually lower these fees.

September 2023 – End of Month Update

Slack Investor remains IN far all followed markets. The ASX 200 (-3.5%) and the S&P 500 (-4.9%) have had a poor month. However, the FTSE 100 is emerging from the doldrums with a positive month (+2.3%).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been completed.

Vanguard 2023 Annual Long term Investing chart and … August 2023 – End of Month Update

Whether it has been a good investing year – or a bad one, August is the time when the Vanguard long-term (30 yr) investing chart lands. It is a timely reminder that whatever is happening in the short term, investing for the long term (> 5-10 yr) in International and Australian shares will compound your wealth. Anyone with a steady income that exceeds their living expenses can do this – so, what a young Slack Investor would do, is Automate his investments, through platforms such as Stockspot, Pearler, Vanguard Personal, or Raiz) … and “Get Cracking!”

Extract from the 2023 Vanguard Index chart (Just the 2007-2023 portion) – the dollar values on the right are the results of investing $10000 in index funds in each asset class for 30 years (since July 1993) *– Check out the full glory of the Vanguard 2023 chart in PDF format – Click image for better resolution.*

The lessons of long term investing

Every year Vanguard publish their performance data on each asset class. Slack Investor looks forward to this – as it demonstrates the powerful compounding that happens when the appreciating asset classes of Shares and Property are held for a long time (30 years). Although this Vanguard collection of data shows the volatility of asset values in the short term – it also also emphasizes the joys of holding and accumulating shares or property for long periods of time. These asset classes have steadily increased in value over the last 30 years. $10000 invested in Australian Shares in 1993 would have compounded to $138 778 in 2023, US Shares would have compounded to $176 155. Staying in Cash would have yielded $34 737.

Slack Investor says download and study this chart … and work towards getting a mix of some appreciating assets … accumulate, then hang on!

Financial year total returns (%) for the major asset classes

In the Vanguard 2023 table below, for each asset class the total annual returns are given and the best performing class for each year is shaded in blue/green … and the worst in pink. What stands out to Slack Investor is that is rare for and asset class to lead in annual returns (blue/green) for two years in a row – and there are years where the leading asset class (blue/green) becomes the worst performer (pink) in the next year. This drives home the need to spread your investments over different asset classes (diversification) and stay the course – 30 years of data talks loudly to Slack Investor.

Total returns for each asset class for the 30 years since 1993 – Check out the full glory of the Vanguard 2023 Brochure in PDF format– Click table image for better resolution.

This table highlights the benefits of diversification across asset classes for the long-term investor. Each asset class might be the best performing (Blue/Green shading), or the worst performing (Pink shading) for the year – and might dominate (or languish) for up to two years in a row. However, often a worst performing asset will show up as the best performing asset in the very next year – or vice versa.

Slack Investor is accepting of the occasional negative returns on a yearly basis for the appreciating asset classes- and concentrates on the 30-yr average long-term annual returns for holding shares and property of over 9% p.a.

When averaged over 30 years, the asset class and annual returns are : For AUST. SHARES 10.0%; INT’L SHARES 8.7%; U.S. SHARES 11.6%; AUST. LISTED PROPERTY 9.0%; and INT’L LISTED PROPERTY 9.7%; This compares with the average cash return of 4.3% p.a.

Slack Investor knows where he wants to be … over the long term, it isn’t cash.

August 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.

All Slack Investor overseas followed markets had a negative month (S&P 500 -1.8 %, and the FTSE 100 -3.4% and the Australian stock market did the same (ASX 200 -1.4%).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

FY2023 Nuggets and Stinkers and … July 2023 – End of Month Update

“Life is not a bowl full of cherries, there’s good and bad stuff“
Fuzzy Zoeller (American professional golfer)

Fuzzy Zoeller does not always say wise things, but his quote above is on the money. Slack Investor takes the good with the bad.

The trampoline effect of stinkers becoming nuggets in consecutive years reared again, with REA making the transition this year. Also, Nuggets … might end on the Stinker pile the year after. Slack Investor puts more emphasis on growth over a multi-year period, but compiles the yearly Nuggets and Stinkers list …. because its fun!

Growth stocks (usually high Return on Equity (ROE >15%), as with other stocks, often have cycles of price – bouts of overvaluation followed by a period of undervaluation.

The percentage yearly returns quoted in this post include costs (brokerage) but, the returns are before tax. This raw figure can then be compared with other investment returns. I use the incredibly useful Market Screener to analyze the financial data from each company and extract the predicted 2o25 Price/Earnings (PE) Ratio, Dividend Yield, and Return on Equity (ROE), on the companies below. This excellent site allows free access (up to a daily limit) to their analyst’s data, on the financials tab for each stock, once you register with an email address.

Slack Investor Stinkers – FY 2023

Financial year 2023 was a welcome recovery in the technology sectors. All of Slack Investors followed markets Australia, the UK and the US having gains over the financial year 2023. However, Slack Investor is always ready for lessons in humility and still managed to pick up a few stinkers along the way.

Integral Diagnostics (IDX) -19% (Sold Oct 2022)

(IDX – 2025: PE 18, Yield 3.8%, ROE 10%) Integral Diagnostics provides medical imaging services at a number of urban and regional locations in Australia and New Zealand. This company was also one of my stinkers last year (FY2022 -39%) The sinking feeling that I got during my monthly chart reviews was just too much … and I finally gave into that negative energy in October 2022 – and sold. This, unfortunately, turned out to be the bottom of the market – and IDX has made a modest recovery since.

Computershare (CPU) -18% (Sold May 2023)

(CPU– 2025: PE 16, Yield 3.8%, ROE 29%) Computershare is well known to owners of some Australian shares as they run the registry for many Australian companies. It started as an Australian technology business in 1978 and since has become a major global player in financial services. Slack Investor just bought at a bad time … and I sold in May 2023 to make another share purchase. CPU seems to be a solid global business though – Will look at buying this one again.

Dicker Data (DDR) -18% (Still held)

(DDR – 2025: PE 14, Yield 6.8%, ROE 42%) Dicker Data is the only Australian owned and ASX-listed major IT provider. It is a hardware, software and cloud distributor for most of the well known US IT companies (Microsoft, Cisco, HP, etc). The business is projected to continue to grow and, as the share price seems to have “bottomed out”, Slack Investor will continue to hold on because of the companies excellent projected PE, Yield, and ROE.

BetaShares Asia Technology Tigers ETF -7% (Sold Sep 2022)

(ASIA – 2023: PE 17, Yield 2.6%,) Growth in Asia … What could go wrong! Plenty it seems. These “technology tigers” that make up this ETF have been part of a global selloff of tech-related shares in Asia since 2021 as many US investors take flight from the China market due to US/China tensions.

This company was also one of my stinkers last year (FY2022 -33%) and was “on watch” during my monthly chart reviews. Sadly, the pain became too much and I unloaded near the bottom of the market again … and, it has since made a modest recovery. I have maintained at least some exposure to the Asian tech sector with with Vanguard FTSE Asia ex Japan ETF (VGE.ASX).

Slack Investor Nuggets – FY 2023

Nuggets made a comeback this Financial Year. Slack Investor continues to invest in high Return on Equity (ROE) companies with a track record of increasing earnings, Companies with these qualities sometimes behave as “golden nuggets”.

Technology One (TNE) +48%

(TNE – 2025: PE 37, Yield 1.5%, ROE 34%) This Software as a Service (SaaS) and consulting company continues to be profitable. This great business was also a nugget last year (+17%). A high 2025 PE of 37 (Expensive) is a little scary but, if the high Returns on Equity (34%) remain, on balance, this is OK. I found this company through the writings of Rudi Filapek-Vandyck – a great Australian Investor and writer, when he talks, Slack Investor listens.

Altium (ALU) +40%

(ALU – 2025: PE 34, Yield 2.3%, ROE 32%) Altium is an Australian based developer and seller of computer software for the design of electronic products worldwide. It focuses on electronics design systems for 3D printed circuit board (PCB) design. Slack Investor has part-owned this business since 2009 and has enjoyed the increasing value that ALU has created. This sector is very now … and remains a favourite of Slack Investor.

CarSales.com (CAR) +37%

(CAR – 2025: PE 28, Yield 3.0%, ROE 10%) CarSales.com is the go to for selling cars, boats and other vehicles. It does, in an efficient way, what the classified ads used to do. I have noticed that the Return on Equity is dropping (Now 10%) and will keep this company on watch – but I cant argue with the recent price rises.

BetaShare NASDAQ 100 ETF (NDQ) +36%

(NDQ – 2023: PE 26, Yield 1.0%) Exposure to the powerhouse of US Tech companies with the simplicity of an ASX ETF. Management fees are reasonable at 0.48% – Slack Investor remains a fan.

Pro Medicus (PME) +36%

(PME – 2025: PE 78, Yield 0.6%, ROE 46%) Pro Medicus is a developer and supplier of healthcare imaging software and services to hospitals and diagnostic imaging groups. Slack Investor actually met the CEO and co-founder of Pro Medicus, Dr Sam Hupert, at an investment seminar last year. His modesty, US foothold, and debt-free approach to expanding his business impressed me – I’m obviously glad I bought in – but the very high PE ratio (+78) is worrying – expensive.

REA Group (REA) +30%

(REA – 2025: PE 39, Yield 1.5%, ROE 29%) Like Carsales.com, REA has dominated the space left by the old newspaper classifieds in selling real estate in Australia. REA has expanded into India and other global locations. A high PE ratio (39) but while projected Return on Equity (ROE) remains high (29%), this is OK.

VanEck Wide Moat ETF (MOAT) +30%

(MOAT – 2023: PE 19, Yield 2.6%,) The Wide Moat ETF run by VanEck is a rules-based selection of “attractively priced US companies with sustainable competitive advantages” Sounds good doesn’t it. The management expense ratio of 0.49% is OK for such curated US exposure.

Slack Investor Total SMSF performance – FY 2023 and July 2023 end of Month Update

After a difficult 2022, FY 2023 is described by J. P. Morgan as being “kinder to balanced portfolios”. True That! The growth stocks that were punished last year bounced back strongly. In the Australian superannuation scene, the median growth fund (61 to 80% in growth assets) returned +9.2% for FY 2023. The ASX 200 chart shows a gradual climb for the financial year.

ASX 200 Weekly chart for FY 2023 – From Incredible Charts

After a tough FY 2022, the FY 2023 Slack Investor preliminary total SMSF performance looks like returning to form and coming in at around +18%. The 5-yr performance is a more useful benchmark to me – as it takes out the bouncing around of yearly returns. At the end of FY 2023, the Slack Portfolio has a compounding 5-yr annual return of around 10%.

The new financial year started of positively for Slack Investor markets. The ASX 200 + 2.9%; FTSE 100 +2.2%; and S&P 500 +3.1%. He remains IN for all index positions.

All Index pages (ASX Index, UK Index, US Index) and charts have been updated to reflect the monthly changes.

Things a Financial Advisor might tell you … and May 2023 – End of Month Update

Slack Investor has blogged about financial advice before – and although an advocate of trying to do as much as you can by researching finance world yourself, it can be a very difficult journey to be across all the fields of saving, mortgages, investment loans, insurance, superannuation, taxation, and investment.

Most people want financial advice but the problem is that it is so expensive. MoneySmart.gov.au outline a case study where “Rhett” has $400 000 to invest – He might be hit with fees of $13 600 in his first year of advice . These fees include a Statement of Advice and Insurance premiums and layers of platform and investment advice fees.

Where to invest your money is the easiest thing to sort out for yourself – with the key words being diversification and low fees. There are cost-effective ways of investing in a diversified way that will suit your risk tolerance without involving a financial advisor (e.g. Stockspot, Pearler). But some people (Not Slack Investor Readers!) need a trigger to just start investing. Finance world is much more complex than just investing your money. Slack Investor can see the need for finance professionals

Things a Financial Advisor might tell you

Firstlinks have trawled the data to determine the most recommended strategy used by financial advisers – the most common of these are listed below.

Let’s just have a look at some of these in more detail.

Rollover Your Super – “Rolling Over” your superannuation is just a way of describing the transfer of your “protected” super into another protected super fund. Slack Investor readers will be all over this one – Of course it makes sense to put all of your super with one provider to avoid multiple administration fees. Combine your super into one fund – preferably an industry fund (lowest fees) with a good 5-10 yr performance record.

Retain Your Super – This is again good advice for the long-term accumulators of wealth. Unless under extreme hardship, resist all attempts for early access to your super. During the COVID-19 outbreak, $4 billion was paid out to 456,000 people under the early super access scheme. This would have helped distressed businesses and individuals in the short-term but may not have been a great idea in the longer term.

Super Contributions – This is a more complicated area and, it might be good to have advice on when, and by how much ,you should boost your super contributions above those which are compulsory. This is tricky when you have competing loads on your take-home pay (Family, Mortgage, etc). Slack Investor was big on maximizing his super contributions once he had a firm grip on his home mortgage.

Apply for Insurance – When you have a family or debts (home loan?) to cover, life and disability insurance is a good idea. You don’t need an advisor to tell you this. Insurance through your super fund is usually the most cost effective way to do this.

Estate and Aged Care Planning – This area is really complicated for the layman. Professional Advice, or much research, needed.

Commence, Rollover, Retain Pension – You may need advice here if planning to mix aged-pension and super to fund retirement. If there are no aged-pension issues, Slack Investor believes that it is best to start an account pension (from your super) as soon as possible and re-contribute any surplus funds as non-concessional contributions.

Commence, Rebalance Investment – An old truth – Best time to start investing? 20 years ago. Next best time to start investing? Now! Rebalancing can be done automatically with cost-effective platforms e.g., Vanguard Super, Stockspot.

What Types of advice Do You Really Need?

The current financial advice system is complicated by well-meaning regulations that are in dire need of reform. In 2022, the Australian Treasury provided a consultation paper seeking feedback on changes to the regulatory regime that would allow financial advice on specific matters without the obligation that the advisor should know everything about your financial situation – No need for the expensive Statement of Advice (SOA).

Ideally, in a future world, you could get advice at various stages in your life from finance professionals at an hourly rate – perhaps in the same way you would consult a medical specialist about a problem. For Instance

Early/Mid-Career Advice: Am I on track with my savings, super contributions and retirement plan? What strategies should I employ to achieve my goals?
Pre-Retirement: Am I ready? Taxation Issues? Aged-pension/Super mix?
Estate and Aged Care Planning: Complicated – Many issues to discuss here.

Alternatively, you could just turn your financial future into a hobby (Like Slack Investor did), and use the internet and books to educate yourself.

May 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. It was a dreary month for the Slack Investor followed markets. The ASX 200 performed poorly this month – down 3.0%, and the FTSE 100 even worse – down 5.4%. The S&P 500 was flat (+0.2%) for the month.

In this month of turmoil for stock indexes, the Slack Portfolio did quite well. This is because it is heavy with technology stocks that are having a moment in the sunshine. The Nasdaq 100 index was up 7.7% for the month of May.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

General Practitioners (GP’s) in Australia … and April 2023 – End of Month Update

Slack Investor is a great believer in writing about experience and a few (fortunately) minor health matters has had him recently exploring Australia’s health system. In Australia, the General Practitioner (GP) is usually the first port of call if you have a health problem and of Medicare will fund a portion of your costs for a consultation. Your relationship with your GP is an important one and it is vital that you feel comfortable with your GP’s manner, knowledge and skills. There are two tiers of GP pricing in Australia.

Bulk Billed – where there is no extra consumer payment required if you have a valid Medicare card.
Mixed Billing – where patients will pay a a bit extra in addition to the Medicare allowance

Bulk billing doctors are becoming harder to find as the rate of bulk billing has fallen to its lowest level in 13 years . According to government figures, it was 80.5% in the 2022 December quarter. Though this figures is likely to be “grossly inflated” as many practices have charged a separate eftpos transaction at the desk and this does not appear in Medicare figures.

What should happen is that either the patient is bulk-billed and pays no money – or they are charged a private fee, a portion of which is rebated by Medicare directly into the patient’s bank account.
Dr Margaret Faux, Health Insurance Law Academic

Levels of bulk-billing are probably closer to 40% as shown in the recent survey by The Age. In answer to the question “Does your GP Bulk-bill or charge you a gap fee?”

Survey results from the Resolve Political Monitor conducted by The Age

This Age poll is in line with results by an excellent organisation called Cleanbill that are driven by a mantra that Slack Investor wholly agrees with …

” … healthcare is at its most accessible when you can see all of your options and their costs before you’ve made a booking.”
The mission statement for Cleanbill

The Cleanbill site is easy to use for locating GP’s in your area and transparently gives their total fees for a standard, or a long consultation. Once you have narrowed your search, you can usually make a booking straight from the site.

Only 42.7% of GP clinics serving nearly 18 million Australians
bulk bill (charge no out-of-pocket fee to) all patients.

At the 57.3% of GP clinics that charge an out-of-pocket fee the average extra cost for a standard, 15-minute consultation is $40.25 (out of a total cost of $80).
Australia-wide survey by Cleanbill – January 2023

The decline in bulk billing is not the GP’s fault as practice costs have continued to rise and the Medicare rebate has not kept pace with the rise in these costs. In 2013, the rebate was frozen for 6 years – and, even last year, though inflation was 6.1%, the Medicare rebate was only increased by 1.6%. The chart below shows how the rebate has failed to keep pace with inflation (CPI) and average weekly earnings (AWE).

The Medicare GP rebate has failed to keep pace with inflation (CPI) and average weekly earnings (AWE) – From ochrehealth.com.au

… more than half of GP practices (55%) plan to reduce bulk-billing and increase gap fees this year
2023 GP Insights Report

Are we heading down the track to a US – style system?

Slack Investor has lived in the US – and hopes not! … and, is pleased that the new Australian government is putting a bit of thought and money into this problem with an announced $2.2b injection of funds into Medicare – no detail yet.

Now Slack Investor does not want a completely “free ride” as he realises that healthcare must be paid for. Even in the much admired Scandinavian health systems there is usually a co-payment associated with a visit to a doctor of $20-25 AUD.

In Australia, many patients pay hundreds of dollars for non-GP specialist consultations, and $40–$50 out of pocket for GPs.
Dr Jillian Farmer – Insight Plus

So perhaps it is just a matter of nudging the co-payment down a bit by increasing the Medicare rebate, and some other reforms – all will be revealed on the Australian government budget night – 9 May 2023.

Slack Investor is hoping for some progress as the Australian Healthcare system is generally good … but could be better. In the meantime, if you are looking for a GP, use Cleanbill to help you find one.

April 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. It was a positive month for the Slack Investor followed markets. The ASX 200 up 1.8%, the S&P 500 up 1.5%, and the FTSE 100 powering on, and up 3.1% for the month.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).