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.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 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.