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Agenda
• Some highlights from the Australian SMSF Landscape
• 2 major mistakes SMSF trustees make in asset allocation
• Some key ways to avoid making these mistakes
• Key considerations before taking the plunge into an SMSF
Tim FullerDamien Klassen
The Australian
SMSF Landscape
Tim FullerDamien Klassen
The Australian
SMSF Landscape
Tim FullerDamien Klassen
The number of SMSFs increased to 584,802
The number of SMSF members is 1,129,542
The estimated value of SMSF assets is $749 billion
The top five asset types held by SMSFs by value are
• cash and term deposits 37% (up from 23% in 2017)• listed shares 26% (down from 30% in 2017)• real property 9% (Flat)• Trusts 11% (Flat) • other managed investments 5%.
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
1st Mistake –Doing Nothing!
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
A concerning trend with
lower balance SMSFs
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
A Conservative
Trend
Tim FullerDamien Klassen
Source – Cuffelinks / Graham Hand
Invest in what you know
Tim FullerDamien Klassen
Invest in what you know
Tim FullerDamien Klassen
1. This is stock picking advice not asset allocation advice
2. These are books about how to find stocks that you are going to take big bets on
3. Asset Allocation is about diversifying
Fighting your own biases
Tim FullerDamien Klassen
1. Confirmation Bias
2. Optimism Bias
3. Loss Aversion
4. Self-Serving Bias
5. Planning Fallacy
Fighting your own biases
Tim FullerDamien Klassen
6. Choice Paralysis
7. Herding
8. Stories vs Analysis
9. Recency Bias
10.Bias Blind Spot
Bad Timing
1. Average Retail investor underperforms by around 2% p.a.
2. Most of the gap is due to bad timing –selling low, buying high
3. It’s a natural tendency that you need to fight against – have a plan and stick to it
Tim FullerDamien Klassen
Bad Timing
Reducing the opportunity set
Tim FullerDamien Klassen
Diversification
Typical Australian Portfolio
1. Residential Home
2. Investment property
3. Bank Shares
4. Hybrids
5. Corporate Bond ETF
Tim FullerDamien Klassen
Diversification
Typical Australian SMSF
5 different exposures to the Australian Housing Market
Tim FullerDamien Klassen
Diversification
Australian Banks
Tim FullerDamien Klassen
Diversification
Hybrids
• Not an institutional asset
• All the upside of debt, most of the downside of equity
• Largest exposures in sector to banks
Tim FullerDamien Klassen
Diversification
Tim FullerDamien Klassen
Russell Investments Australian Select Corporate Bond ETF
Source: Russell Investments
Diversification
Tim FullerDamien Klassen
Diversification
Tim FullerDamien Klassen
Name Ticker VB VNQ VEU VWO SHY TLT TIP DBC GLD
Vanguard Total Stock Market ETF VTI 0.91 0.43 0.75 0.58 -0.24 -0.24 0.06 0.29 -0.1
Vanguard Small-Cap ETF VB 0.4 0.63 0.47 -0.25 -0.28 0.02 0.29 -0.08
Vanguard REIT ETF VNQ 0.38 0.38 0.36 0.57 0.55 -0.15 0.13
Vanguard FTSE All-Wld ex-US ETF VEU 0.87 0 -0.09 0.35 0.4 0.05
Vanguard FTSE Emerging Markets ETF VWO 0.14 0.03 0.44 0.42 0.17
iShares 1-3 Year Treasury Bond ETF SHY 0.68 0.66 -0.05 0.5
iShares 20+ Year Treasury Bond ETF TLT 0.72 -0.37 0.44
iShares TIPS Bond ETF TIP 0.05 0.55
PowerShares DB Commodity ETF DBC 0.28
Final Notes
Tim FullerDamien Klassen
SMSFs are a great solution if you want full control.
• Ability to combine assets with spouse and family
• Much broader investment palette available• Real property with limited borrowing
• Higher levels of control
• More flexibility in retirement
• Can be cheaper than Master Trusts with higher balances
Final Notes
Tim FullerDamien Klassen
SMSFs are a great solution if you want full control.
• You need to ensure that you have the timeto spend on the management of the fund,for your own sake!
• Complex tax affairs can combine well with SMSF’s providing you have a good accountant / adviser.
• With complete control, comes completeresponsibility!
Final Notes
Tim FullerDamien Klassen
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