Alex Dunnin reveals where he would invest $10k
Where would you invest $10,000? We spoke to eight finance experts to find out what they would do with such a windfall.
If the COVID-19 crisis has taught us anything, it's that life can throw up curveballs when you least expect it. It's also highlighted that not as many of us have our finances in as rosy a shape as we might have thought.
Sure, we could be on a good salary, perhaps have some investments paying us a bit of extra income and might even live in a nice house in a good neighbourhood and drive a high-end car. But when the tide goes out you see who's been swimming naked. And what you see may not be as attractive as you expected it to be.
So, a windfall of $10,000 is about housekeeping and tying up loose ends as much as it is for investing in the future. Is my will in place, are my insurances up to date and have I got the right protections?
Then there are the buffers. If I had no income for a month or two would I be able to put food on my table and cover my bills? Sadly, millions of Australians probably couldn't.
After all that, it's the tech sector that we should be paying more attention to. Today's modern economy is nothing without Big Tech.
Investing your super in an ESG option
If any section of the superannuation marketplace has had a good COVID-19 crisis, it's been the ESG (environmental, social and corporate governance) sector.
In what has amounted to a de facto real-time grand experiment, ESG investments have shown that not only can they withstand a once-in-a-century market shock, they can come out the other side in better shape.
Latest analysis by Rainmaker Information (publisher of Money) confirms that in 2019-20 ESG super funds outperformed regular super funds by almost 2%. Over three years they outperformed by almost 1%.
Reinforcing this, three of Australia's best five MySuper products in 2019-20 and six of the best 10 were ESG products or they were run by super funds heavily committed to ESG investment principles. Over three years, four of the best five were ESG options or were
run by ESG funds.
On top of this again, Australia's best specialist ESG superannuation investment products performed even better than ESG MySuper products.
So, it's a resounding "yes": I would invest my super into an ESG option. And I do.
You can invest into ESG through an explicitly ESG investment option or the fund running it can follow ESG principles.
But just because a fund is ESG doesn't make it good. To be a good ESG super fund,
it first needs to be a good super fund. This means don't fall for the flipside: there's no such thing as a dud super fund running a good ESG option.
This leads us to some more fundamental ideas: what ESG is and, more crucially, what it's not.
It's not the job of ESG super funds to solve climate change or rid the world of bad things.
If people attack ESG super funds for not being pure enough, for not divesting away from fossil fuel companies fast enough, for not being extremist enough, it means they don't understand ESG super. They forget it's about balancing ESG with being a good super fund and getting the best investment returns they can. It's not about the fund's trustees grandstanding and chaining themselves to a coal truck so they can get some good footage to post on Instagram.
Their job is getting me the best investment returns they can for the investment and strategic risks they are willing to take on. And if they can do this while trying to do some good, why shouldn't they?
We've already established that choosing an ESG investment option shouldn't cost you money. The surprise is that it might end up making you more money.
And now for the big money question: which are Australia's highest-performing ESG superannuation products? In alphabetical order: Australian Catholic Super, Australian Ethical, Aware Super, CareSuper, Future Super, HESTA, Hostplus, UniSuper and Vision Super.