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70% : Proportion of Australians with retirement savings in default super funds (There's cause for optimism, The West, 31 Dec 2011)Salaried employees are forced to put money into super funds. So what does a bricklayer know about investment? What does an engineer know about finance? What does an administrative clerk know about equity markets, the Chinese economy, international equities? Not to mention all those mysterious defensive stocks, derivatives and dead cat bounces...
How are typical employees expected to make informed decisions on the long-term investment options for their retirement savings?!
That's why we select financial "experts" to give us advice.
Unfortunately, as Nick Bruining reports, the financial experts know no more that anyone else.
"Most leading analysts [are] saying shares are undervalued..." Why? Presumably because all the experts are paying too little for them... because the buying (or non-buying) experts believe that the shares are not worth much. So who are these analysts who believe that shares are undervalued?
If you can sell a share for $10 then it is worth $10. That is its value.
These "leading analysts" are guessing the future, guessing that these $10 shares will -- at some indeterminate time in the future -- be worth $11. So they are, the experts claim, "undervalued".
So why are the shares selling at only $10? Because -- according to the actual market value -- they are worth just $10. Shares are valued, not undervalued.
Still, one analyst predicts that a key index will stay below this year's high. Which means, I guess, that at least one analyst believes that shares are currently overvalued. Which is, of course, just as false.
"There's cause for optimism", according to the headline. "The general mood (for 2012) is not a positive one," according to another expert, quoted at the end of the article.
So in one report we have gone from optimism to pessimism.
And this is just a review of the guesses of financial investment "experts".
How is the non-expert expected to know the financial future? We don't -- so we employ experts.
We are forced to pay money into super funds. We hope that the super funds will know what they are doing. That they will know more about investment -- their stated field of expertise -- than we do. That expertise is why we pay them some of our money.
Well, we're forced to pay someone. It may as well be a self-professed and hopefully qualified expert.
So why buy a dog and bark yourself?!
The government forces us to give money to large investment companies. We are provided with huge amounts of data... ranges of mysterious choices... wild and contradictory guesses provided by numerous "experts"... but no training.
The government wants us to take the blame for "our" forced investment plans.
Is anyone surprised that 70% of Australians take the default option?
Rather than being surprised, perhaps the government could act to protect our superannuation savings. We are forced to save. We have no investment expertise.
The government forces us to save. Super funds do their best -- we hope -- but we can't really know. 70% of super fund members do not know enough to attempt to better the "experts".
Time for the government to stop washing its hands of super fund responsibility.
We are forced to give money to super funds. We do not have the knowledge to try to outperform "experts" who manage investments for a living.
The government has a role -- a responsibility -- to govern the super funds. To protect the forced investments of the 70% of Australians who push money into a black hole of investment. And who hope to get something back when they really need it.
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