No Time To Break The Bank

Sun Herald

Sunday October 19, 2008

George Cochrane

If you're still in the market, you might as well stay, writes George Cochrane.

I TURN 70 in January and my plan was to retire by April. At the start of the year I had $180,000 in my Colonial First State super fund (in shares). Come January I'm entitled to receive about $32,000 for the pensioner bonus scheme (five years past net age) and about $28,000 for my long-service leave by April. I also have Commonwealth Bank shares. My Colonial First State super has dropped to just more than $160,000 in June. It's probably under that amount now. I am ringing my adviser but he, of course, will tell me to hang in and ride it out. What should I do? B.E.

My argument is that a market like this, where bad news seems to cascade onto bad news, is not a normal market that might rise and fall 20 per cent to 25 per cent every year or two. My guess is the market might cease falling at about 3400 on the All Ordinaries (50 per cent below its October 2007 high) but that's just a guess based on chart analysis. Still, if it's anywhere near correct, the low of 3939 on October 10 was within about 15 per cent but not the end of it.

The situation is reminiscent of the falls experienced after September 11, 2001, when the All Ords jumped 500 points in the subsequent five months to February 2002, only to fall more than 680 points in the next 13 months to finally bottom in March 2003. If you're not out of the market now, you might as well stay in but consider getting into cash if the market appears to peak at higher levels, possibly around 4400 points.

Taxes from takeover

HOW do I determine the capital gains tax on my Rinker shares, which were acquired compulsorily by Cemex in 2007? W.D.

Cemex bought Rinker shares for cash only and thus there is no scrip-for-scrip rollover relief. You said your shares were acquired compulsorily, which would have been in August 2007 and the default price was $19.50 a share for the first 2000 Rinker shares.

If you received your Rinker shares in the April 2003 CSR demerger, you received one Rinker share for every CSR share held. Rinker represented 75 per cent of the market value of the cost base of your post-CGT CSR shares. If you need it, there's a demerger calculator on the ATO website.

Angry about advice

WHEN I retired 2 1/2 years ago, I had a super fund with UniSuper, a term deposit of $200,000 with my bank, St George, and a fully paid-for home. When I visited my bank in 2006 to reinvest my term deposit, I was advised by the bank manager to see an associated financial adviser who strongly recommended I roll over my UniSuper fund into a managed superannuation fund along with the $200,000. I was at first reluctant but was persuaded eventually. I instructed that any investments be very conservative. The investment would be with Asgard, with the adviser and Asgard taking fees. You can understand my shock when my recent annual review revealed the investment had lost more than a third of its value, including a significant exposure to Centro Properties Group. The adviser was unapologetic, saying it was just the up and down of the investment market and the investments were highly recommended. I will soon turn 70. Should I stick to these investments? Professionals should be judged and paid on performance and these managers have not performed. E.S.

It doesn't sound like you were invested in a conservative mix although, until recently, property funds were regarded as conservative. The question regarding a fund that has taken a large loss is whether, once the sharemarket recovers, your funds will rise as fast as any other. You might visit some other advisers and pose the question to them and see if you get a consensus.

The argument that professionals should be paid only if successful is, frankly, hollow. Otherwise you would pay your doctor only if you got better. However, your instructions should have been followed and, if you feel your explicit requests were ignored, you can complain to the Financial Ombudsman Service.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: bank ombudsman 1300780808; pensions 132800.

© 2008 Sun Herald

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