• Australian (ASX) Stock Market Forum

Average financial intelligence?

Discussion in 'General Chat' started by Tyler Durden, Apr 14, 2012.

  1. Tyler Durden

    Tyler Durden Well-Known Member

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    Not sure if 'intelligence' is the most apt word, but here goes...

    I suppose if you're on this forum then your level of financial IQ would be somewhat higher than average, so I would like to ask, what is the level of financial IQ of people you know and meet?

    I have a friend who told me he has his money in a CBA savings account earning him 4.5%. I told him Ubank offered 6.01%. He mumbled something about not being bothered to change, which kinda surprised me. I also explained to him how after inflation and tax, that he wasn't even getting 4.5% yet he didn't seem to understand it, and still thought he was getting a 4.5% return in real terms.

    I also know of people who are somewhat aware of the state of the economy and the whole Greece debt crisis thing, yet when I asked why they didn't change their Super strategy to accomodate for this, they also said they couldn't be bothered.

    Am I the only one who feels :banghead: ?
     
  2. Bill M

    Bill M Self Funded Retiree

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    It doesn't surprise me at all. That's why 82% of Australians rely on some sort of government pension in retirement.

    Back in 2009 the CBA offered a share purchase plan. Each shareholder could buy new shares at $26 and buy up to 10K worth. At the time CBA was trading at $29, it was a good bargain and I bought into 2 lots, one mine, one my wife's. I told a mate who was also a CBA holder, he said he didn't have any money. I suggested to him to sell 10k worth at $29 and buy back 10k worth at $26. After checking with him 2 weeks later he didn't do it and missed out, unbelievable.:eek:
     
  3. Glen48

    Glen48 Money can't buy Poverty

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    Home owners are the same sitting there waiting for it all to tank.
     
  4. Julia

    Julia In Memoriam

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    Yes, I'm continually surprised by how little responsibility people take for their financial wellbeing. Even people who are highly intelligent, well educated and in successful careers. They seem to have a sort of blank spot when it comes to money.

    And it's not confined to people who are so wealthy they can afford not to have their money working.

    On the Storm Financial thread some of us have suggested the Storm investors need to get financially literate even if only to be able to discern whether future financial advice is valid. There has been some quite vehement disagreement from some of them that there should be any requirement for them to do this.

    I suppose the financial services industry continues to thrive on the basis of this apparent lack of interest by individuals in their own financial health.
    As long as there's a steady stream of willing clients, happy to accept whatever the adviser offers (usually what most benefits that adviser), nothing will change.
     
  5. Tyler Durden

    Tyler Durden Well-Known Member

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    I think 'astute' is the word I was looking for - financially astute :)
     
  6. Julia

    Julia In Memoriam

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    You cannot be astute about anything without first acquiring some education or understanding in that field.
     
  7. Smurf1976

    Smurf1976 Well-Known Member

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    People put incredible effort into choosing a new car, washing machine or even a TV and yet most completely overlook finances, super, investments etc.

    Incredible but largely true.
     
  8. young-gun

    young-gun Well-Known Member

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    but smurf it's alot easier to purchase and use a washing machine or drive a new car than it is to grasp the concept of, and the risk involved with investing in anything.

    i dont think its so much ignorance as it is fear, laziness, and a total lack of understanding.

    there are so many facets to investing that i think it would make alot of peoples head spin(mine included) and could potentially introduce so much more un-wanted stress into a familys' household than would be considered healthy. especially in the current market.

    i think alot of people take comfort in believing that their super and their future is in safe hands with a super fund, and that ticking the box for a low medium or high risk portfolio is as far as they need to take it. in the past super funds have delivered, and investments have all done really well. couple this with word of mouth and you have an industry that appears successful, reliable, and safe.

    a guy i work with was telling me a story of how his father use to jump on the net every month to see how many thousands of dollars his super had increased. i doubt he is still doing the same.

    so if you have no interest in economics, and think that the 'pros' are going to ensure you have enough money for retirement, then why take it any further?

    unfortunately times are changing quite rapidly, and imho i wouldnt want to see anyone who didnt have a thorough understanding and a solid gameplan for the current market to be considering a SMSF or even gambling with savings at the moment.

    you also have people that simply aren't smart enough to do it themselves. its not easy(despite what some claim:rolleyes:) to be a successful investor. and as mentioned above there is so many thigns to manage and consider. what percentage of my portfolio should i have in gold, what percentage should i use for an IP, should i consider day trading?, when do i sell?, what is this share offer thing i just got in the mail? do i have to do anything with it? should i just put all my money into one company? how do i even trade?! are all trading platforms the same? my friend said he has made a fortune off margin loans, so i took one out and bought some shares!!:) whats a margin call? they're saying i owe them money?

    now all of the above is just a small snipet of what people are facing, and although it can all be answered with research and guidance, it takes a dam long time to have enough knowledge to be confident in what you are doing. naturally anyone would be crazy to start leveraging themselves without having a complete understanding of what they are doing, but the fact is not everyone would be, and that may be at no fault of their own, it may be something they just missed.

    i've traded, although i am not currently. but investing scares me at the moment. i see alot of downside and not much upside. sure i can trade cfd's but then im thrown into the basket of people that don't fully understand what they are doing, and run the risk of stuffing up while leveraged. i could trade speccys and small caps and make a few bucks but that would require hours of reading and research, time i just dont have.

    at the end of the day, im thinking the mum with a new SUV was alot happier than wall street guys in 09;).

    in some cases, i think it's best that the best way for some people to look after their finances is to work hard, support their families, and hope that the big wigs can look after them.

    investing is a full time job in itself. JMO:2twocents
     
  9. Tyler Durden

    Tyler Durden Well-Known Member

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    Point taken. But it comes back to me wondering why people spend so much time on other things, such as deciding which tv, ipad or mobile phone to buy, instead of reading up about their own money.

    I agree when you say "i dont think its so much ignorance as it is fear, laziness, and a total lack of understanding." But why not make efforts to understand? After all, if you are not looking after your best interests, no one else will (despite what managed funds advisers tell you).

    Also, re:

    I think people should educate themselves and understand that that's just not the case. I was talking to my colleague about super and she was surprised to realise that when she retires, the amount she'll have won't be enough for her to live off. I suggested to her to change her strategy to cash, bonds and property, given the high amount of uncertainty in the share market these days - somehow I doubt she even hgave it a second thought after the conversation finished.

    I'm just surprised at the amount of people who don't understand and/or care about their own money.
     
  10. young-gun

    young-gun Well-Known Member

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    i dont think its that they dont care. and i do completely understand where you are coming from, and agree with alot if it.

    i think that it should be the responsibility of the government to push the issue of super far more. there should be advertising on tv and radio stressing the importance of super. i means ure there is co-contributions and all that. but it still isnt well known.

    in some cases(your friend for example) she simply had no idea. now unless you either have an interest in it all, or are surrounded by people that are actively doing things about their finances, i think some would be simply oblivious to it all. but this comes back to your point about making yourself aware, its your money and your future after all. I agree with this, but there seems to be something missing. it is very imporant after all, but the fact that people are able to slip through the cracks and possibly end up retiring with insufficient funds to not only live, but enjoy their non-working life, then it seems to me that something isnt working, and people need to be made aware.

    there wont be a pension.
     
  11. Tyler Durden

    Tyler Durden Well-Known Member

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    But I think this is what I was drawing on in my other thread here:

    http://www.aussiestockforums.com/forums/showthread.php?t=24632

    If more people were aware of how the various systems worked, then it could be a bad thing. Let's take my example - I've changed my super strategy to cash to wait out this out Euro crisis thing, but I can't see why they won't just let me put the money in a Ubank account earning 6.01% interest and saying "it will be illegal for you to withdraw any of it", instead of forcing me to go through some other middle person to do the same thing and get less return due to their fees.

    Why? Because it creates jobs. If they did allow what I suggested, a lot of jobs would be lost. So in order to keep jobs, we have to complicate things, to the extent that people don't understand it and just willingly slave away their whole lives in this rat race.

    My :2twocents :p:
     
  12. Starcraftmazter

    Starcraftmazter Well-Known Member

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    Not at all - the world is full of idiots, that's how the elite make money.

    +1

    The problem is the welfare state. People are used to this bizarre the idea that the government will save them, the government will help them, the government will always give them everything they want.

    The problem is big government. Toss people out with no welfare, no healthcare, nothing - then I think you'd find that they would pay a hell of a lot more attention to their finances.
     
  13. young-gun

    young-gun Well-Known Member

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    but doesnt a self managed super fund allow you to do whatever you want with your money? as long as you adhere to the rules and regulations, and naturally dont withdraw the money in any way shape or form? or am i way off
     
  14. Starcraftmazter

    Starcraftmazter Well-Known Member

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    The problem is, you would need $17k in a ubank 6% just to cover the auditing fees for a SMSF. The point is, the government has zero right to impose this sort of regulatory bull**** to impede people from taking full control of their super and doing something sensible with it. Now most people are stuck with crap returns and crap fees because the government can't do anything right. The irony is that Australians will never accumulate enough super under the current scheme, and future taxpayers will still have to pay for everyone's pension :banghead:
     
  15. Julia

    Julia In Memoriam

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    Rubbish. Audit fee for most SMSFs is around $500.
     
  16. Julia

    Julia In Memoriam

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    Usually your posts are pretty sensible but imo you're way off the mark here.

    What is 'ignorance' if it's not a 'total lack of understanding'?
    Change the fear and laziness to a determination to acquire education and you will resolve the ignorance.

    So you think it's better that the family should reach retirement and suddenly realise they don't have enough to live on?


    Don't they receive regular statements? Wouldn't it be a simple matter to calculate that rate of return going forward to retirement age to assess if there will be enough, just as a starting point.
    It's a simple calculation a primary school kid could do.


    OK, so what is the father doing to improve his situation?
    What message has the son taken from this?

    Agree absolutely that no one should be gambling. Get educated instead.

    Yes, that will always be true for some. Not much we can do about that, I guess.

    You don't have time to learn enough to feel confident about investing, huh?
    How many hours a day do you spend just chatting, typing posts on this and other fora, watching television etc etc?
    It's not a matter of time. It's a matter of priorities.

    Oh sure. And how happy will she be with that old SUV when she reaches retirement age and doesn't have enough to live on?

    Nonsense.
     
  17. Julia

    Julia In Memoriam

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    Of course there will. What do you think we will do with people who have failed to provide for their own retirement? Kill them off? Leave them on the street?
    There will always be a very basic income for people in their old age.
    Whether it's enough to live on is another question.
     
  18. Julia

    Julia In Memoriam

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    On the contrary, they have every right.
    The alternative is a blow out to the taxpayer in providing old age pensions.
    If people refuse to save during their lifetimes, we need to enforce retirement savings imo.
    And of course you can't have these funds being dipped into like a convenient little piggy bank in the pre-retirement years. What would then be the point of Super?
     
  19. So_Cynical

    So_Cynical The Contrarian Averager

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    Correct.

    All those new Uni graduates need fat cat jobs to go to after all that studying...and need good money to pay for that education which creates even more fat cat uni grad jobs...and the money goes round and round.

    An economy in transition from manufacturing and farming needs services jobs.
     
  20. Starcraftmazter

    Starcraftmazter Well-Known Member

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    ?? Where, please chuck us a link, I would switch immediately. They cheapest I've seen are probably around $800.

    Also, that would still be $8k before you just break even - not even make a profit. Surely this is wrong.

    But don't you see Julia - there's a very simple incentive the government can use to entice people to save. Remove pension benefits. No need to regulate anything, people can save for their retirement much easier without having to pay for stupid regulations, and the government can even lower the tax rate to help people save because it would reduce it's expenditure. Everyone wins!
     
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