Investors are understandably nervous at the moment, but need to make sure that this does not result in decision paralysis or making the wrong choice with their investments, says Michael Hutton, wealth management partner at HLB Mann Judd Sydney.
“A good example of the uncertainty that exists is the concern that the government is will, at some point, make changes to the superannuation structure. Yet superannuation will almost certainly remain a worthwhile part of any long term investment strategy, and should still be considered a useful investment vehicle for lifetime saving.
“Superannuation allows investors to keep their money in a safe area that is subject to stringent regulations but that still offers real incentives.
“Investors shouldn’t be deterred to invest in superannuation due to a belief that government legislation will change, as we have seen this happen many times before.
“They should also bear in mind that when superannuation has been changed before, adjustments have always been grandfathered, and this is likely to be the case with any forthcoming changes.”
Mr Hutton said that there is also increasing nervousness about investment markets, but investors should not be swayed from their investment strategy by the latest trend, investment fad, or product.
“Chasing a trend will more often than not result in a less than impressive long-term yield.
“It often means that investors end up selling at low points and buying at high points in the market cycle.
“A recent report in the USA* confirmed that mutual fund investors frequently achieve lower returns over 20 years compared with returns from the S&P500 over the same period because they choose the wrong times to buy or sell.
“Another thing investors should be wary of is heavily marketed schemes that are touted as tax effective investments. If the investment is not of high quality, the long term return is likely to be missing.
“The same is true of a knee-jerk reaction to the current rise in property values to take advantage of negative gearing. Property should be assessed in terms of its long term potential, not its current tax benefits.
“There is a difference between investing in assets to get tax benefits that might arise from them, to investing through a tax advantaged investment vehicle like superannuation,” Mr Hutton said.
HLB Mann Judd Sydney is a firm of accountants and business advisers, and a member of the HLB Mann Judd Australasian Association.
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