Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 326

Welcome to Firstlinks Edition 326

  •   3 October 2019
  •      
  •   

Last week, the Government announced the first Retirement Income Review since the 1993 Fitzgerald inquiry into national savings, which followed the introduction of compulsory super by Paul Keating in 1992. As background for this new Review, we have selected six Classic Articles, including one from Keating himself, which many readers would otherwise miss. These special pieces were highly popular when first published and all had something different about them.

The Government's Terms of Reference for the coming nine-month review say:

"The review will look at the three pillars of the existing retirement income system, being the age pension, compulsory superannuation and voluntary savings. (It) will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages." 

Notably, while the Government has already ruled out including the family home in the age pension assets test, there are references to both 'fiscal sustainability' and 'appropriate incentives for self-provision in retirement".

It's therefore a good time to dip into the archives for some classic insights, and there's nowhere better to start than with Paul Keating, father of our superannuation system. He admitted in this 2013 article that SMSFs were a late afterthought, and now they're the largest super segment. Keating gave some valuable guidelines for asset allocation:

"So, Australia is 2.5 times more heavily weighted into equities and relatively underweight other asset classes. We are disproportionately weighted into the most volatile and unstable asset class."

In the same year, Justin Wood's spending guidelines for retirees took up a similar theme. He used Yale University's endowment fund as an example of an investor with long-term obligations subject to short-term markets. It's fascinating, therefore, to check how Yale has changed in the subsequent six years. Here is their latest asset allocation taken from their website.




Yale's Chief Investment Officer, David Swensen, is a legend in the US, delivering an extra $4.5 billion in value over the last decade versus the average of other endowments, while delivering 11.8% pa for 20 years. He is a great believer in the value of active management, here in 2017 disagreeing with Warren Buffett:

"While Buffett appropriately recognizes the challenges investors face in manager selection—perhaps most notably that the vast majority of managers who attempt to outperform fail after taking into account fees and expenses—his conclusion goes too far. The superior results of Yale and a number of peers strongly suggest that active management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.

He has changed his asset allocation such that US equities are now only 3.5% of assets and most of his holdings are in unlisted assets, venture capital or absolute return funds which are difficult for retail investors to access. He invests differently because he is not seeking to beat a benchmark but achieve long-term stability for the future security of Yale's funding. Swensen's main lesson is: invest according to your own goals and don't be paranoid about the market.   

Here is how he differed from other educational endowments in the US in 2018:

Which is a good link to Chris Cuffe's Classic Article on the mistakes most people make in thinking about investment risk, and he draws on Howard Marks to give his own definition of risk.

Noel Whittaker is Australia's best-known personal adviser and best-selling author, and in 2018, he provided his quick-fire 20 Commandments of Wealth for retirees. Timeless wisdom!

And finally, in a change of pace, two unconventional articles that were big hits in 2016 and 2017.

Jo Heighway draws on her many years as an SMSF specialist with a unique perspective on how many of her clients are so passionate about their SMSF that it becomes a biography of their life.

Then Alex Denham tells a personal and precautionary story about her father's experience with aged care, which all her years as a financial adviser did not fully prepare her for.

(Note that some of these authors are no longer in the role described at the bottom of the articles, and some of the rules and numbers may have changed but we have not reedited the words).

Back to new and 'first link' articles next week, and remember there are thousands of articles in our archive covering almost every financial topic.

 

Graham Hand, Managing Editor

For a PDF version of this week’s newsletter articles, click here. For a PDF version of the article on the Retirement Income Review, click the 'Print' button at the top of the article.

 

  •   3 October 2019
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

Testamentary trusts: Treasury has picked the wrong reading

A decades-old estate planning tool has survived one tax crackdown only to be caught by another. The surprise isn't who the reform is targeting, but who could end up paying the price for drafting choices made years ago.

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Will investors be better or worse off under new housing tax changes?

Housing tax reforms have sparked warnings of market turmoil and promises of greater fairness. But after modelling nearly two decades of property data, the results suggest winners and losers may not be who many investors expect.

Latest Updates

SMSF strategies

Division 296: the initial moves to make before the windows close

What if the best superannuation strategy isn't about earning more, but acting before your options disappear? Several overlooked planning windows are narrowing, with consequences that can last for decades.

Planning

Avoid unnecessary CGT with this estate planning clause

A simple estate plan can create a ticking time bomb. One overlooked clause can pit spouses against children, delay inheritances, and potentially leave a family facing an unexpected tax bill worth hundreds of thousands of dollars.

Exchange traded products

The hidden trade-off in fixed income ETFs

Some investment trade-offs are immediately visible. Others are embedded in the way a portfolio is constructed. Understanding the difference may explain why similar-looking investments can produce surprisingly different results.

Retirement

The mortgage free retirement is fading

What happens when a generation reaches retirement carrying obligations previous generations largely avoided? New research suggests we may need to rethink both how much we need in retirement and what life could look like.

Retirement

The key question to inspire a confident and purposeful retirement

Most people spend decades planning for retirement. Far fewer plan for what happens when they get there. The difference may explain why so many find the transition harder and less fulfilling than expected, despite careful preparation.

Latest from Morningstar

Making the case for a 'good enough' portfolio

Some investors spend years chasing the perfect strategy. Others choose a path that’s simply good enough and move on. Which approach is more likely to deliver both better outcomes and a happier financial life over the long run?

Investment strategies

Is the US market as expensive as CAPE says?

Many investing ideas survive for decades. But that does not make them right. A famous valuation measure implies that US shares are dangerously expensive, but the evidence may point to a very different conclusion.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.