‘I’m scared of investing my money, so should I just live off what I have in the bank?’

Q. I am turning 63 and made the smart decision with my partner to sell both of our very large homes and downsize into a strata-titled lifestyle community that’s under development. Doing this meant I had $285,000 in cash left over after buying new house. I have a self-managed super fund (SMSF) worth around $665,000.

My question is about putting nearly all of my money from both house and the SMSF into an industry superannuation fund as I’m too scared with the current economy to buy more shares. I bought speculative shares recently and lost most of the money – about $10,000. Also years ago, I trusted a stockbroker who lost me $90,000 approximately.

Should I just keep cash in bank to live off? Or how can I find out what to do with it? Also, would my blue-chip shares such Wesfarmers be better in industry fund? I’m trying to find out what my super fund has averaged earning as well at the moment.

A. This is an interesting question. There are a number of interrelated issues at play here. Firstly, you are asking whether you should move your SMSF funds and add the balance of the cash and move it into an industry superannuation fund.

I assume you are referring here to the downsizer contribution rules. These rules allow contributions of up to $300,000 from the proceeds of downsizing your principal residence. You should be aware that you need to be 65 or older in order to take advantage of these rules. I assume that perhaps your partner is over 65. You can easily check your eligibility for this type of contribution on the ATO website.

It is worth getting some advice to determine whether all of your investment assets should be in superannuation and perhaps there is some logic for holding some assets outside the superannuation system.

You also indicate that you are too scared with the current economy to buy more shares but nevertheless have recently bought speculative shares. My concern is that your poor experience with buying speculative shares and dealing with a stockbroker have negatively impacted on your overall view of investing, particularly in the sharemarket.

Whether you remain with your current fund or move to an industry fund or other public offer fund you will still need to decide how to hold your assets – the asset allocation decision. Normally people are best served by having a diversity of different asset classes including cash, fixed interest, Australian shares, international shares and property.

The right mix of these asset classes depends upon a range of factors and I suggest you obtain some advice as to the most appropriate mix.

In most cases one of the key determinants of this mix will be your need for cash flow from your superannuation assets. A decision to just leave the money in the bank at the currently historically low interest rates is unlikely to deliver your cash flow needs. I would suggest you avoid buying direct shares in the Australian sharemarket and instead look at a more diversified approach. Personally, I prefer to use index funds and have not used a stockbroker for many years.

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