By: ANTHONY KEANE
CHOOSING a super fund or investment today means potentially considering thousands of options for your money, which is enough to turn many minds into jelly.
We often become paralysed when faced with too many decisions, but experts say there are some simple ways to cut through the confusion.
Jam, not jelly, is a good example of how our brains are wired, says ipac financial planner Patrick Canion. He says a famous study by a US psychologist found that consumers were 10 times more likely to buy jam when six varieties rather than 24 varieties were on display.
Canion says this is why many super funds only offer six to eight investment options. “They will often have life stage choices or pre-mixed funds — those generally are fantastic, well blended and you don’t have to think about it,” he says.
Canion says super fund members should take time to check their member statement or look online to see how their money is invested.
“Don’t be afraid to change — it’s usually just one form. Don’t take the easy option when it comes to your super because it deserves more attention,” he says.
Write down your financial goals, and even some life goals, because having them on paper gives you something to measure your progress against.
Putting some effort into understanding investments gives you the greatest potential for good returns, Canion says.
“Sweat equity (when you put effort into an investment task) maximises your chances of getting a better return than if you just pick something using a dart board. Making an effort doesn’t mean it has to be complicated.
“Never be afraid to say no to something you don’t understand or feel comfortable with, because there will always be another great investment.”
Wealth for Life Financial Planning principal Rex Whitford says getting professional advice is important, and you should always read an investment’s product disclosure statement. “The regulator demands these be provided for a reason,” he says.
A relatively new choice in investment has been exchange traded funds, which spread your money across an entire stockmarket index, holding each stock in proportion to its size on the index — such as the ASX 200 or the S & P 500 in the US.
ETFs can be bought on the sharemarket and their fees are much lower than traditional managed funds. Whitford says some ETFs are better than others, and you need to be careful.
“They should be properly researched, just like any investment before proceeding. The risk is that many investors will trade them like a share, frequently. This is a mistake in most cases.”
Source: News Corp Australia Network
