Don't be a bunny and blow your hard-earned savings
Part five of how to run a self-managed super fund for newbies. More stupid things you can do with your SMSF:
I've banned candles in the Padley household because, after 32 years' broking, I know that one day the house will burn down and when it does, my kids will have all manner of fantastic excuses about how it happened, how it wasn't their fault and how lots of other people have had their houses burn down as well. But the reality will be that the house has burnt down by then and it'll be simply too late. I am the Fat Controller and I have to act to stop the house burning down.
In the same way, if you don't take responsibility for the future of your SMSF, then when the next GFC arrives, Asia collapses, the $A evaporates or the New York stock exchange is blown up by a nuclear bomb and all your investments go to pot, I know what's going to happen.
You're going to hear a fistful of wholly convincing excuses about how it wasn't some financial professional's fault, that relatively speaking they've outperformed, that some people are even worse off and that as an SMSF trustee you should have been aware of all the risks. But it won't change anything. By then your retirement expectations will have been flushed and you're going to spend the next 20 years visiting Centrelink.
It's a "self-managed" super fund, not a "professionally managed" super fund. If the first thing you do is delegate all responsibility for your SMSF performance to someone else, you might as well have left the money in your employer's default fund to be managed by a professional according to their priorities (relative performance and keeping their job) rather than your priority (making money).
Anyway, isn't the whole idea to get an education, to empower yourself with knowledge, to gain experience, to take responsibility for your financial future?
To avoid disappointment and those "once in a lifetime" events that seem to happen once a year in the investment markets, someone needs to be on point that is driven to action by your lifestyle imperatives, not by relative performance, and I'm afraid the truth is that the only person qualified to do that is you.
Yes, you can use financial professionals, of course you're going to need advice on structure and yes, you'll want investment recommendations and execution. But you also need a Fat Controller who cares, has your risk tolerance, your sleep-at-night threshold and knows your unexpressed expectations. That's you. You've got a 20-year journey ahead. Start it. Wasn't that the point? Of course, if instead you set up your SMSF just to keep your accountant in fees, your financial planner in retainers and me in commission, then that's fine. Thanks.
Falling for the marketing
At this early stage of your SMSF career you are at your most vulnerable when it comes to financial sector marketing, so let's try to put you straight. No, you cannot earn $100,000 to $2 million a year trading forex, starting with as little as $10,000 in your account.
No, you cannot live the lifestyle you've always dreamt of trading just five hours a week and letting the computer do the work for you.
No, that free seminar on how to trade CFDs and forex is not for your benefit. No, you cannot do it the Warren Buffett way or someone would be doing it already.
No, you will not "make $2 million in the stockmarket" by reading an old book. No, your boat will not come in. No, IPOs are not a river of gold, in fact, if they're any good you won't get offered them, and if you get offered them, you don't want them.
And no, it is not all about inside information, in fact, one of our veteran professional traders gave us the immortal quote: "If I'd never been given any inside information I'd be a million dollars better off."
There is a lot of stuff for sale there and some outlandish claims and myths about how easy it is to transform yourself. If you believe all that, you're the bunny and you will be dealt with accordingly. Meanwhile, for those of you who are left, your sober duty is to (1) look after your money and (2) grow it if you can. Life isn't a casino you know. (Is it?)
For the other "SMSF for Newbies" articles so far go to the Marcus Today website.
Marcus Padley is a stockbroker and
the author of sharemarket newsletter Marcus Today.