Relax with the Short Term Super Analysis Already!

finance | By Jim Mills | Tuesday, 30 July 2019

Depending how close you are to retirement, it is generally agreed that Superannuation should be considered a ‘long term’ investment. But what does ‘long term’ even mean and why do most Aussies measure their superannuation performance based on such small timeframes such as bi-annual and annual statements?

As investors we need to step back and consider that real growth relates to real growth in the underlying companies we’re invested in, any movement you see in short term periods usually has nothing to do with real growth.
According to Morningstar (investment research house), the minimum time you should be invested to for a growth portfolio is seven years.
Consider BHP, the second largest business on the ASX – what does BHP have to do to make a material and sustainable increase to its profits and cash flows?
BHP runs four main business streams – Iron ore, Coal, Copper, Oil/Gas. Let’s take copper as an example. What is required to boost profitable copper production materially?

  1. Find potential copper exploration acreage – Government gazette or takeover (6 months)
  2. Assemble drill rigs and drill out a JORC resource (2-3 years)
  3. Engineering design of mine and Government Approval (18 months)
  4. Mine construction, equipment purchases and delivery, accommodation construction (18 months)
  5. Infrastructure construction, rail, rolling stock, port, storage
  6. Begin mining, solve bottlenecks, test equipment, increase to nameplate capacity

It may be seven years before they start generating any revenue based on a project like this – up until that point it has been all cost. This doesn’t make BHP a bad investment – it simply makes it a long-term investment.
Each industry or business is different. The considerations always include:

  • Capital investment involved
  • Design/engineering
  • Relationship building/Government approvals
  • Funding
  • IT software/building/testing
  • Management with experience
  • Managing the response of competitors

So next time you receive your super statement – don’t just look at the last 12 months, it will pay you to look a little further back than that OR understand that you are somewhere in the cycle of real growth. Your investment expectations should not automatically reset every 12 months.

Visit for financial planning advice.
This article sponsored by Merit Planning Hills

> tagged investors, jim mills, capital investment involved, funding, it software, building, testing, super, superannuation

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