Tuesday, July 8, 2008

Setting up our DIY superannuation fund

When you setup up a self managed super fund you have the ability to invest the money how you see fit (within certain guidelines). However you must employ the services of a company to help set up your fund and to audit the fund every year. Below explains the process we went through. First some general information about super funds and then why we selected the company we did.

Firstily we looked at the fido website

Key points
Setup costs around $1000
Yearly auditing costs around $1000-2000

They recommend you do not do it unless you have at least 200,000 in your super

I found a couple of companies that will do the work for a great deal less than the costs on the FIDO site. This is very import for the success of our fund as the costs could have a huge effect on the compounding return of our fund.

Company 1
I rang up this company and this was the result of the conversation


· $345 establishment fee
· $1095 per annum yearly fee
· same costs for 1 person or 4 in the fund

Company 2
This was a very good deal


$0 establishement fee
$599 p year Auditing fees
There are no costs in leaving or joining the fund - just a rollover form

This seems really good! The reason they are so well priced is that all transactions must be conducted through on online trading account with commsec. This means that there job of auditing is much easier and quicker for them. This does mean there are some limitations with what you can invest in at the moment no derivatives can be purchased (that doesn’t bother us) and purchases are limited to Australian companies only.

We decided to apply to set up our fund with them. We are now waiting the forms to arrive in the post.

Has anyone else used E-superfund or anyone have any advice for us along the lines of our choice of DIY auditors?
 I would love to hear anyone thoughts

Monday, July 7, 2008

Why are we setting up our own DIY super fund

In Australia we have a mandatory contribution scheme for or retirement. The fund is managed by one of number of companies who invest the money on your behalf. For this service they receive fees. I have been paying into one of these funds for a number of years.

I (like many other people) have pretty much ignored my superannuation for too long. A couple of months ago I thought it was high time I examined my fund with a fine tooth comb and what I found was pretty worrying.

I found discrepancies on their web site where they contradicted the return for the fund - after my pursuing this I was informed this was copy paste error. Hmm!

I then went through the accounts of my fund and found that the performance of the individual components of my fund (eg Australian shares 15%, International share 20%, cash 10% etc..)didn't seem to add up with what was the stated performance of those components on the superannuation companies website. I rang up and seemingly I am the first person to have asked for a breakdown of this information. After 6 weeks I got an answer t my question.

This I find very concerning not only was the information hard to come by to seems very few people are asking questions. This lack of transparency I find very worrying and I predict some of the superannualtion funds are going to get into trouble because no-one is asking questions. I decided that if a fund was to get into trouble it wasn't going to happen with my money. I presented my findings to the club (we allready had done work on value investment in the past) and this was what persuaded me and the other guys to go for a DIY super managed by value analysis principles.

Has anyone else tried to get information from there superannuation fund? What were your results?

Friday, July 4, 2008

Setting up the site

In these blogs I intend to hold nothing back and explain our whole process we go through to make our decisions. There are a bunch of spreadsheets and other documents we are using currently that I would like to publish. I would also like to publish a comprehensive list of books / podcasts / websites we have used so far and include new sources as we use them. I hope to put all this up on the blog over the next few weeks.



A few years ago I got to my 30th birthday and I realized at my age I really should be taking my finance a bit more seriously. The problem with finance is that it is so deadly boring. To overcome this inertia I set up a club with some other friends in order to force myself to learn stuff about this wide ranging topic. In the club we have monthly meetings where we present to the group on topics of our choice. Luckily we all enjoy learning new things and it has worked out very well. We have covered a wide veriety of topics such as tax, reducing spending, buying property etc.

More recently investment strategy has become of more interest to us. We are based in Melbourne Australia and in Australia we have a mandatory pension scheme. These schemes are called superannuation funds and involve employee and employer contribution made to a private investment fund. You also have a choice to setup and manage your own fund. In earlier presentations we concluded that we had some deep concerns about managed super funds and have decided to manage our own.

We are currently embarking on setting up a self managed super fund where we are intending manage the investments by applying the principles of value investors such as Warren Buffet and Benjamin Graham.The purpose of this post and (hopefully the supporting podcasts) are to share our journey on this task.

We hope that this may assist other people who are on a similar journey. I also hope that we me benefit from the feedback of others to assist us on our journey.