Question: We would really appreciate some expert advice; we’re in a financial mess at the moment, but it may be salvageable with the right plan. My husband and I have approx. $86,000 in an SMSF. We are using Esuperfund to do yearly accounting as they charge a low flat rate of around $700.00. We are self-employed, husband is 73 and I’m 66, we anticipate working another five years+.
We owe around $145,000 on our home, and have around $10,000 in credit card debt through paying off our children’s debts. We were using one of the share buying/selling advisory newsletters to invest in shares, and it worked well for a while, but for the past two years it has been losing money.
My question is, should we consider moving to a managed fund, or would the yearly fees be too great for the small amount we have in super? Finally, if you think it’s a good idea, is there a fund you would recommend please?
Answer: (Paul Rickard): Thanks for the question. I am sorry to hear about your situation – hopefully, I can help a little.
Firstly, it is commendable that you are using Esuperfund to keep the fees down, but arguably, $86,000 is too small a balance to run a SMSF. You may be better off using one of the industry funds, such as Australian Super, REST or Catholic Super. They have relatively low fee, and allow you to choose the investment option that suits best.
That said, my first recommendation would be to pay off your credit card loan, and then pay off as much of your home loan as you can. You should be able to withdraw your super money tax free. If that results in closing your SMSF, then any future super contributions that you choose to make could go into one of the industry funds I mentioned above.
It is a tough business trading shares to boost investment returns – so I understand why you may be questioning the merits of keeping this going.
Question: HML has been suspended for some time. What future does it have please?
Answer: I can’t shed any light as to why Henry Morgan Ltd (HML) remains suspended. I suggest that you direct your enquiries to the Company Secretary. That said, it can’t be good news, and you are right to feel a little concerned.
Question: With Fixed Interest being an important part of one’s portfolio, I wanted to get your opinion on XTBs or Exchange Traded Bonds. I have used ETFs in the past to get exposure to Bonds and High Interest, but the XTB look interesting (e.g. YTMAWA, YTMQF3).
Answer: Thanks for the question. Maybe – if you are comfortable with individual bond credit risk, and think that interest rates aren’t going to rise that quickly.
A couple of points to note:
- you are investing in a trust, which owns the underlying bonds;
- the product issuer takes a margin of around 40bp;
- secondary market liquidity depends on the market makers (I haven’t been able to assess this); and
- YTMQF3 is a trust that invests in a five-year corporate bond from Qantas. The underlying bond is trading in the secondary market at a yield to maturity of around 3.76%pa, the underling yield on the XTB is around 3.30% pa. I am not sure that this sounds particularly exciting, given the rate you can probably find on a 5 year term deposit.
The other code you quoted – YTMAWA – doesn’t appear to be correct. Like any financial product, I suggest you read the PDS carefully.
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