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Concentrate - But Not In Your Portfolio
BY ROBIN BOWERMAN - 11/09/2017 | VIEW MORE ETF ARTICLES

A thought-provoking exercise for self-managed super fund (SMSF) trustees is to compare their fund's asset allocation to those of the balanced portfolios of Australia's biggest super funds.

In many cases, this comparison will often show significant differences in the asset allocations. Often those differences are quite stark.

A typical balanced portfolio of a big institutional fund is spread between at least the main asset classes of Australian shares, international shares, fixed interest, property and cash – with infrastructure often adding to the mix.

The 2017 SMSF/Vanguard/Investment Trends Self Managed Super Fund Reports, released in August, report that 55 per cent of SMSF trustees surveyed have more than half of their portfolio invested in one investment type (outside managed funds).

Of these SMSF trustees with such concentrated portfolios:

  • 35 per cent have more than half of their SMSF assets in Australian shares.
  • 7 per cent have more than half of their SMSF assets in residential property.
  • 9 per cent have more than half of their SMSF assets in cash and cash products.

Australians, of course, have had a long-held affinity to direct property investments. And the franking credits from Australian shares are highly attractive to investors – including to yield-focussed retirees.

However, SMSF trustees who do not invest in perhaps less familiar asset classes to them like international shares and bonds deprive themselves of valuable opportunities to spread their risks and rewards.

An SMSF with a highly-concentrated portfolio will have very different risk-and-return characteristics to a big fund with a balanced portfolio.

An appropriate strategic or target asset allocation takes into account each investor's risk tolerance, time horizon and financial goals. Does your SMSF's asset allocation do this?



View More Articles By Robin Bowerman

Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing our website content so it may not be applicable to the particular situation you are considering. You should consider yours and your clients' circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This website was prepared in good faith and we accept no liability for any errors or omissions


 

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