Barefoot Investor Scott Pape has urged Australians not to shift their superannuation into cash out of fear, after AustralianSuper members moved $1.27 billion into the option in just one month.
Pape said the September total was 51 per cent higher than the previous month, blaming “totally unhinged” social media algorithms for repeatedly pushing predictions of an imminent sharemarket crash.
He said some readers had contacted him convinced markets were about to collapse by 80 per cent, as Japan’s once did, or that the global economy was preparing to return to the gold standard.
“They get fed more of those stories every day because the algorithm knows that fear works,” Pape said.
“Some people end up selling out of their super and eating baked beans in a bunker, waiting for the reckoning.”
According to Pape, anyone who moves their super into cash while waiting for a crash must make two difficult decisions: when to exit the market and when to re-enter it.
“Well, they’re on the sidelines, waiting for the algorithm to tell them when it’s safe to go back in (hint: it never does). The problem is they actually need to be right not once, but twice: get out before the market crashes, and get back in before it rebounds. As my wife tells me, I’m not even right once, let alone twice.”
Scott Pape, known as the Barefoot Investor, advised Australians to be cautious about taking financial guidance from social media
He criticised influencers, including Andrew Tate, for giving young people a distorted view of money
“The algo is how a diesel mechanic I had working at the farm recently went from ‘nice spot of rain we’re having’ to unleashing a 10-minute monologue that started at Albanese and ended at Muslim gangs and civil war.”
“You’ll be at Christmas lunch soon (and) Uncle Wally will be explaining how the entire financial system is about to collapse. At least you’ll know exactly where he got it from.”
In the same column, Pape answered a question from Luke, a 15-year-old reader seeking guidance on investing.
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“I’ve got $3,500 in shares, yet once you go online it gets overwhelming fast,” Luke wrote.
“Everyone’s getting rich overnight on crypto while long-term investing feels boring. If you were 15 today, what would you focus on over the next 10 years?”
Pape used his response to again warn about the powerful influence of social media.
“You said once you go online it gets overwhelming fast. Damn right it does! That’s because the algorithm is shoving you towards the stuff most 15-year-old boys are trying to work out: how to be a man, how to attract girls, how to get rich – and the loudest voices in that space are cartoon characters like Andrew Tate and influencers who sound convincing and look sorted on socials,” he said.
“But they’re not. Their real job is flogging you their overpriced courses or worse, some crypto scheme they’re making money from.”
After a 15-year-old asked about investing in Bitcoin, Pape encouraged him to spend more time reading books
Pape encouraged Luke to read several books, including Atomic Habits by James Clear, and to focus on living in the real world rather than spending too much time online.
“The truth, Luke? Nothing life-changing happens while you’re staring at a screen.”
“You asked what to focus on over the next 10 years. Ultimately, you need to focus on doing things. Not just reading or watching videos about doing things but doing them.”
“Most people never make that leap. This book will help you build habits. And just like compound interest grows your money exponentially, good habits at 15 – like reading, exercising and being kind to others – will completely change the trajectory of your life.”
Earlier this year, Pape also urged Australians to review their super funds to ensure they were not paying excessive fees or missing out on stronger returns.