Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 326

Welcome to Firstlinks Edition 326

  •   3 October 2019
  •      
  •   

Last week, the Government announced the first Retirement Income Review since the 1993 Fitzgerald inquiry into national savings, which followed the introduction of compulsory super by Paul Keating in 1992. As background for this new Review, we have selected six Classic Articles, including one from Keating himself, which many readers would otherwise miss. These special pieces were highly popular when first published and all had something different about them.

The Government's Terms of Reference for the coming nine-month review say:

"The review will look at the three pillars of the existing retirement income system, being the age pension, compulsory superannuation and voluntary savings. (It) will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages." 

Notably, while the Government has already ruled out including the family home in the age pension assets test, there are references to both 'fiscal sustainability' and 'appropriate incentives for self-provision in retirement".

It's therefore a good time to dip into the archives for some classic insights, and there's nowhere better to start than with Paul Keating, father of our superannuation system. He admitted in this 2013 article that SMSFs were a late afterthought, and now they're the largest super segment. Keating gave some valuable guidelines for asset allocation:

"So, Australia is 2.5 times more heavily weighted into equities and relatively underweight other asset classes. We are disproportionately weighted into the most volatile and unstable asset class."

In the same year, Justin Wood's spending guidelines for retirees took up a similar theme. He used Yale University's endowment fund as an example of an investor with long-term obligations subject to short-term markets. It's fascinating, therefore, to check how Yale has changed in the subsequent six years. Here is their latest asset allocation taken from their website.




Yale's Chief Investment Officer, David Swensen, is a legend in the US, delivering an extra $4.5 billion in value over the last decade versus the average of other endowments, while delivering 11.8% pa for 20 years. He is a great believer in the value of active management, here in 2017 disagreeing with Warren Buffett:

"While Buffett appropriately recognizes the challenges investors face in manager selection—perhaps most notably that the vast majority of managers who attempt to outperform fail after taking into account fees and expenses—his conclusion goes too far. The superior results of Yale and a number of peers strongly suggest that active management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.

He has changed his asset allocation such that US equities are now only 3.5% of assets and most of his holdings are in unlisted assets, venture capital or absolute return funds which are difficult for retail investors to access. He invests differently because he is not seeking to beat a benchmark but achieve long-term stability for the future security of Yale's funding. Swensen's main lesson is: invest according to your own goals and don't be paranoid about the market.   

Here is how he differed from other educational endowments in the US in 2018:

Which is a good link to Chris Cuffe's Classic Article on the mistakes most people make in thinking about investment risk, and he draws on Howard Marks to give his own definition of risk.

Noel Whittaker is Australia's best-known personal adviser and best-selling author, and in 2018, he provided his quick-fire 20 Commandments of Wealth for retirees. Timeless wisdom!

And finally, in a change of pace, two unconventional articles that were big hits in 2016 and 2017.

Jo Heighway draws on her many years as an SMSF specialist with a unique perspective on how many of her clients are so passionate about their SMSF that it becomes a biography of their life.

Then Alex Denham tells a personal and precautionary story about her father's experience with aged care, which all her years as a financial adviser did not fully prepare her for.

(Note that some of these authors are no longer in the role described at the bottom of the articles, and some of the rules and numbers may have changed but we have not reedited the words).

Back to new and 'first link' articles next week, and remember there are thousands of articles in our archive covering almost every financial topic.

 

Graham Hand, Managing Editor

For a PDF version of this week’s newsletter articles, click here. For a PDF version of the article on the Retirement Income Review, click the 'Print' button at the top of the article.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.