- Personal Finance
Why superannuation is not the best investment
Back in 2010 while I was working as a divisional manager with Hargy Oil Palm Limited, I accidentally stumbled upon something that completely changed my life.
That thing is call ‘Pathways to wealth’. I found the secret in a book written by an average high school math teacher, who turned into a multimillionaire investing in residential properties. In her book, More Wealth From Residential Property, Jan Somers discussed that to build wealth, you first decide to;
- DO IT YOURSELF or
- PAY SOME ONE ELSE
Before you rush into the rest of the hub, I want you to slow down. Watch this powerful video from self made millionaire Robert Kiyosaki. It will give you the boost you need to blast away.
Your Guide to Wealth from millionaire author and educator Robert Kiyosaki
This is the most important decision you must make when you begin your journey to financial freedom.
The choice is really yours-
Two roads diverged in a wood, and I –
I took the one less traveled by
And that has made all difference
For me, I have chosen the first one. The DO IT YOURSELF and only my partner and I and my investment club members can say how rewarding it is.
From these experiences, I have come to conclude that superannuation really is not the best wealth generator. It will never make you rich unless you get the money out and do something with the money to bring in more money.
Have you ever heard phrases like; Save for a Rainy Day, superannuation, Rollovers, Annuities?- these terms sum up what these funds can do for you. These are called managed funds. Managed funds simply means that someone gets your money and invest for you.
Fund managers spend their time analyzing revenue generating assets and then invest your money into assets that the think can return good profit. Because of their massive effort in finding the right investments and invest for you, they in return get the all the cream of the return on investment and pass some meagre scraps to you
Superannuation is simply a managed fund with notoriety for rather questionable tax concessions. Any good returns are, in fact swallowed by taxes and fees.
When you invest your money into a superannuation fund like the NASFUND and POSF, they, then get your money and invest into cash trust equity trust or property trust. These trusts then invest your money into cash, shares or property. Something which you can do it yourself and get all the cream on your investment.
Fund manager like NASFUND and POSF here in Papua New Guinea are simply the middleman. If you educate yourself and become financially smart, you will realize that one better way to boost your wealth is to spend less and earn more. In the superannuation scenario, you can easily remove extra cost by removing the middleman and doing it yourself.
Perhaps you are thinking that fund managers are better educated on investment and are capable of making good investment decisions than you. We have limited experience of the collapse of superannuation funds in PNG. In the other parts of the world, you may recall the 1978 crash of the economy. Many of the superannuation funds were folded to ashes.
Choosing a managed investment is not a bad idea. But really it is for financially ignorant people. Those that don’t care what happens to their money. It is better to save some money in the superannuation funds nut you must know now that it will never make you wealthy.
One of the biggest things that superannuation steals from you is time. For a small return, you waste more time.
“Save for a long term” “Do you often hear guys from the superannuation say? The more capital they have makes it possible to earn a lot of money small gains in the market. Let’s say NASFUND has about 40, 000 members who contribute K20 ($8). That’s about K800, 000 ($320 000). Supposing NASFUND invests monthly, they would have K1, 600, 000 (K1. 6 million to invest) ($640, 000).
Imagine NASFUND bought BSP shares at K7.80 per share with the K1.6 million. In that case, NASFUND will own 205, 128 BSP shares. If the price moves to K7. 90, NASFUND will earn K1, 620, 511 ($648, 204). A ten toea move earns NASFUND K20, 511 ($8, 204). If you just had 100 BSP shares and if the price moves to K7.90, you really don’t earn much as compared to NASFUND.
Pooling the funds from public is leverage, these smart money managers’ uses.
If you have been contributing to a superannuation fund, let me ask you a question;
“Do you know how your money is invested?”
“What if the fund you have been investing in suddenly falls. Will you have some savings for retirement?”.
I am often asked if I have superannuation. When I explain my fund is my business and other investments, they don’t understand. So many people have been deceived into thinking that superannuation can only be obtained through an institution. Ponder a moment.
“What do you expect from a super?”
“Do you expect it to give you long term security and income on your retirement?”
“Does investment in shares or property accomplish this?”…The answer is yes.
Investment is shares and property gives you more flexibility to further grow your wealth and it even gives you more in return compared to the institution superannuation.
It only requires little bit of rearrangement on your thinking to see it that way.