Letters of the Week

The real risks, Buffeted ROE, Next Eleven, and no super change

Where the real risks are

There is a lot said and written in investment circles about the equity market being high-risk for retirees. My wife and I run our own self-managed super fund in pension phase. We love stocks with good fully franked dividends. We live on franking credits. The biggest risks in our opinion are government changes to super, and pollies who do not understand living in retirement.

B & G Hall

Buffeted ROE

Regarding Roger Montgomery’s article Fifteen stocks for a Buffett list, I believe the return on equity figure for GUD is about double the underlying as it includes a post‐tax contribution of $49.4 million from the Breville share sale. Is this correct?

M Hamilton

Roger Montgomery’s response: Thanks for your question. In the case of that article, I recorded the owners’ ROE for that year rather than the continuing operations ROE. It will be lower next year.

Next Eleven

I’ve tried to find a way to invest in the “Next Eleven” countries through my super without having to undertake a direct investment. Basically the aversion to direct investment is to minimise sovereign risk. I have not been able to identify a fund that is available in Australia. Can you help, and if one does not exist how about lobbying to get some created?

K Liddelow

Editor’s response: The “Next Eleven” is the collective name given to the countries Bangladesh, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam, and was coined by a Goldman Sachs economist in 2005. Given the very broad range of economies, major assets and companies within that large group, may be hard to find a single fund tracking “the N-11”. Goldman Sachs does have a small equity portfolio fund, but the simplest way to get diversified exposure would be through ETFs that track indices on each of those 11 countries. Examples might include iShares’ MSCI South Korea Index (EWY) or MSCI Mexico Investable Markets Index (EWW) – along with plenty of others traded on the NYSEArca exchange.

Against super change

I am totally against the government changing super in any way – I thought they promised not to as an election pledge?

G Dixon