A greater share of the wealth

THINGS might seem a little tough at the moment - they're not really, check out Nicole Pedersen-McKinnon's column for at least five reasons why you should feel smug - but our wealth as measured by personal investment, which includes investments held in banks, shares and investment properties, is targeted for massive growth.

You may have heard predictions for increases in superannuation funds from the current $1 trillion to almost $3 trillion by 2020. That, of course, is fuelled by the superannuation guarantee, currently 9 per cent but due to rise to 12 per cent, which goes into the superannuation basket year after year, regardless of how wealthy we might feel as individuals.

But personal investment is somewhat different. It's what we invest when we can afford it and is obviously dependent upon our financial situation.

According to a recent report by Rice Warner, total personal investments are sitting at $1.943 trillion and will grow to $3.588 trillion during the next 15 years.

It should come as no surprise that the majority of personal investments - nearly 47 per cent - are directly held in investment properties Australia's love affair with bricks and mortar is well documented.

Cash is also very popular at the moment. Directly held cash and term deposits make up a third of our personal investments with direct investment in equities accounting for just 10 per cent.

Rice Warner predicts that how we invest during the next 15 years will change. And they are probably right. The odds are that as Europe sorts out its problems, sentiment will improve and we won't be so keen on safe and defensive places to put our money.

Our allocations to cash are still predicted to be fairly high in 2026 - with direct holdings of cash accounting for 30 per cent of all personal investments.

However, as buying shares becomes cheaper and simpler via online brokers and instruments such as exchange-traded funds, we're more likely to want to hold more of them and hold them directly, i.e. not through managed funds.

So Rice Warner predicts our direct holdings of equities to rise to almost 20 per cent of all personal investment. Investment property is also predicted to drop to about 37 per cent (of directly held assets).

Unfortunately for the people in the business of managing our wealth, direct investments will remain the largest component of our individual personal investment portfolios.

That figure is currently 93 per cent. It will reduce slightly in the next 15 years to 91 per cent but we will still remain hesitant when it comes to giving our funds to the professionals. But, lucky for them, they still get to look after most of our superannuation funds.

I wrote last week about the growing number of self-managed superannuation funds and the assets they control but they still account for less than half of all superannuation assets, which means the rest of those funds are in the hands of the financial institutions.

That's not necessarily a bad thing but just make sure, like always, you're getting value for what you're paying for.