One size does not fit all
In Australia today, we must all make important investment decisions for our future wellbeing.
We have an age pension system that acts as an important safety net, but our superannuation system is lump sum, with individuals being ultimately responsible for how their money is invested.
When making those decisions, it is essential (but often difficult) to try to separate the “noise” from the “information”. So, what exactly is the difference.
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Black swan events are unexpected happenings in financial markets that have a big impact.
During my working life I have been “fortunate” to witness two of the biggest black swan events of the past 50 years – the decision of President Nixon in 1971 to cancel the convertibility of US dollars into gold at a fixed price, and the GFC.
Both had a profound effect on investment markets, with big implications on the best way to invest your savings.
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In the financial world, “Black Swan Events” are unforeseen changes that have a profound impact.
The term ‘black swan event” has come into regular play in the world of finance since Nazim Taleb’s 2007 book, “The Black Swan; the impact of the highly improbable.”
Recognising the existence of “Black Swan Events” is profoundly important, and has significant implications on how we all should manage financial matters. In some ways, the lessons of Black Swan Events challenges much of the conventional wisdom of financial planning.
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Okay, at the risk of being beaten up by well-heeled senior citizens (It’s OK, I’m one myself) wielding folded budget papers, I will say it:
“I support the Government’s action to limit the amount held in an allocated pension to $1.6million.”
There, I have said it.
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There. I’ve said it.
There are many reasons to criticise the superannuation changes announced in the budget (more on that next time), but retrospectivity is not one of them. Why? Because they are not retrospective.
Much of the considerable amount of criticism has been around the changes being “retrospective”. However, there is confusion between “retrospectivity” and “grandfathering”.
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