Hey guys, I have a tricky ethical question for you. I’m going over my superannuation account, and looking into investment options. My fund offers a socially responsible investment (SRI) option, and a high-growth option. Looking at the trends over the last 10 years, the SRI has kept more or less on par with a balanced investment.
However, aside from the market crash in 2009, the fund still rests about 3 to 5 per cent below the high growth options. As a 23 year old who works in the corporate world, I’m torn. On one hand, I see the need for stronger investment in socially responsible companies, and am very drawn to this option. However, missing out on an additional 3 to 5 per cent each per year stings, especially when you compound that over the next 45 years or so. Any thoughts? Thanks, Ethical Dilemma
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Making superannuation choices is always tricky, because by definition it’s a very long-term investment, and we’re not always great at taking a long-term perspective. The final decision can only be yours, but here are some points to bear in mind.
It’s dangerous to assume that because the high-growth option has done well over the last decade it will continue to do so. Performance is never guaranteed; amounts can fall as well as rise. So while you might be sacrificing 3-5 per cent growth, you don’t know that in a decade the situation might not have reversed. You note that during the 2009 market crash the high growth fund was not doing so well by comparison: what if the year you choose to retire is another 2009 in performance terms?
Since you’re relatively young, the standard advice would usually be to go for the high-growth option now; there’s still plenty of time to switch to something less risky in the future. But that advice doesn’t take ethics into account at all. High-growth industries often trample over human concerns in their quest for profits. Superannuation is your money: would you really be happy knowing you were making more money because all the funds were invested in a cigarette company, for example? If that makes you uncomfortable, then the SRI option has to be worth considering.
One other thing: carefully check the fees associated with each option. If the growth calculations have been made without factoring those in, you’re not seeing a full reflection of the money that will be in the fund in either case.
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