With the recent COVID-19 outbreak and last year’s publicity of “the great valuation scam” on ABC News, it can be worrisome to know what to do with the funds that hold our key to retirement: our superannuation account.
If you are new to the conversation, the key takeaway is that “valuations, particularly for things that can’t easily be priced, have gone nuts, to the point where they have headed into fantasy-land territory.”
One such company, WeWork, has recently demonstrated the degree of inflated valuations, where it was recently slashed in valuated price from $US47 billion – down to $US4.9billion.
So how does a $45 billion-dollar valuation cut affect you?
Your Superannuation May Be Dependent On Valuations
After the Global Financial Crisis (GFC) hit over a decade ago, many investors lost a significant portion of their super balances. In order to protect against such a scenario again, many fund managers decided to diversify their investments.
On such form of diversification came in the form of “alternative assets”.
What You Need To Know About Alternative Assets
Alternative assets are generally referred to that which “does not fit within the traditional broad asset classes” like shares, property, fixed interest and cash. It could include anything from private property to key infrastructure assets like power lines, water and transport. usually aren’t affected by a market downturn or economic downturn as shares, for instance.
While investing in alternate assets is not inherently unwise, where it poses risk to your superannuation balance is that many of these assets are valued infrequently (sometimes up to every five years). Where this is problematic is that the current market value of the asset may be incorrect, which won’t be evident until it is valued in real-time.
What You Can Do
Due to the complexity of superannuation, many people often opt to leave their asset allocation in the hands of experts – or even their default option of their superannuation fund.
What you need to understand is that many of these default funds are allocating a growing share of their portfolio to alternative assets in order to help maximise the fund’s performance. To claim back control of your superannuation and not lean so heavily on the volatility of alternative asset allocation, consider looking into the makeup of your super portfolio. Do not be led blindly by “top-performing super funds” until you’ve done your homework.
Often we’ve found when working with clients, that rather than switching to a completely new fund, there is a way we can simply reallocate your portfolio for more stability.
To find out if you’re protected from impinging valuations of many assets, take advantage of our FREE 20-minute Financial Starter Session. Book in your time TODAY or call us on 1300 784 084 to find out how you can save your money in the future.