Comments on: The Advice to Never Touch Your 401(k) is Not So Cut-and-Dried

By: Robyn

Robyn — Thu, 17 Jul 2008 09:59:40 +0000

You can never know whether markets will correct or rebound sufficiently. you can only assume the markets will correct and go up. Why?
1. History tells us it will.Look back over the last 10 years where we have had 2 negative cycles. The average compound return is still positive for most funds even after the last years performance
2. We are talking about markets. We are talking about businesses so why some managers will collapse others will rebound and improve. Diversification is a highly recognised way to ensure that you can weather the stormy seas. Diversification not only across asset classses but across fund managers and fund styles. This should protect you over the long run from losses and provide 'average long term gains'
Ricks comments on new money should be correctly interpreted as new money coming in will be directed (by the smart funds) into fund managers/investments etc who have a good short and long term prospect (taking into consideration the current markets). This will then ensure the fund is in a good position to boost returns immediately across the investment options and across the members.

By: Coffee Addict

Coffee Addict — Thu, 17 Jul 2008 07:16:18 +0000

My understanding is that super balances are required to be held in trust. Funds should not using new deposits to pay old obligations, that is they are not allowed to "log roll". In a trust arrangement, your super balance is are also safe from creditors should the fund manager go belly up.

There are significant differences between the US and Australian frameworks. And every fund needs to be assessed on its own merits.

I'm not an expert in this but if someone is really unhappy with the direction the funds are taking they may be able to place their money in a "complying" retirement savings bank account.

A complete bailout (as hinted by Mogambo) could, in an Australian context realise massive penalties, losses and fees (if you are under 55 years of age).

By: rick

rick — Thu, 17 Jul 2008 04:42:10 +0000

With super companies they get this endless 9% off wagers to play with.
So in theory the new money coming in will buy into the unit price.
Unit price of fund managers when high or low super will keep putting into the pool.
What ever pool it is in aussie shares, property, overseas ect……..
The new money will mix with the old money and you will get the average.
This is the Simple version not 100% correct

By: Robert

Robert — Wed, 16 Jul 2008 11:41:00 +0000

I was stupid I stayed in cash, $A its looking a lot better now.

By: laurelweiner

laurelweiner — Wed, 16 Jul 2008 04:14:03 +0000

Great Writing here, you put words to the cacaohonies cacuaphonies!

By: Coffee Addict

Coffee Addict — Wed, 16 Jul 2008 01:11:09 +0000

Many advisers and super fund managers continue tell their clients not to bail out lest they miss the rebound.

How do they know there will be a sufficient rebound? How do they know how long it will take the market to rebound? Why aren't they trying harder to minimise client losses? Are they claiming to be clairvoyant?

The only thing I can predict with certaintly is the profit lawyers will make out of this mess.

By: Chris

Chris — Tue, 15 Jul 2008 04:33:14 +0000

I moved my Superannuation(401k) out of equities last November. I took some light losses to prompt me in to action but compared to the 50% return I got that year I'm way ahead. This at a time when superannuation providers are actively dissuading people (TV Commercials) from moving to cash(You have to wonder about their true motivations).

I'm ahead by 20-30% on merit that I have not lost money, let alone the DR inspired investments I have since undertaken when I elected to personally manage the portfolio. Like you, it was possibly the most well timed actions I have ever performed.