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• Some highlights from the Australian SMSF Landscape • 2 major mistakes SMSF trustees make in asset allocation • Some key ways to avoid making these mistakes Agenda • Key considerations before taking the plunge into an SMSF Tim Fuller Damien Klassen
The Australian SMSF Landscape Tim Fuller Damien Klassen
The number of SMSFs increased to 584,802 The The number of SMSF members is 1,129,542 Australian The estimated value of SMSF assets is $749 billion SMSF The top five asset types held by SMSFs by value are Landscape • 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 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
The Australian SMSF Landscape Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
1 st Mistake – Doing Nothing! Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
2 nd Mistake Only sticking with what you know Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
A concerning trend with lower balance SMSFs Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
2 nd Mistake Only sticking with what you know Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
2 nd Mistake Only sticking with what you know Source ATO SMSF Statistical Report – March 2019 Tim Fuller Damien Klassen
A Conservative Trend Source – Cuffelinks / Graham Hand Tim Fuller Damien Klassen
Invest in what you know Tim Fuller Damien Klassen
1. This is stock picking advice not asset Invest in what allocation advice 2. These are books about how to find you know stocks that you are going to take big bets on 3. Asset Allocation is about diversifying Tim Fuller Damien Klassen
1. Confirmation Bias Fighting your 2. Optimism Bias own biases 3. Loss Aversion 4. Self-Serving Bias 5. Planning Fallacy Tim Fuller Damien Klassen
6. Choice Paralysis Fighting your 7. Herding own biases 8. Stories vs Analysis 9. Recency Bias 10.Bias Blind Spot Tim Fuller Damien Klassen
1. Average Retail investor underperforms by around 2% p.a. 2. Most of the gap is due to bad timing – 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 Fuller Damien Klassen
Reducing the opportunity set Bad Timing Tim Fuller Damien Klassen
Typical Australian Portfolio 1. Residential Home 2. Investment property Diversification 3. Bank Shares 4. Hybrids 5. Corporate Bond ETF Tim Fuller Damien Klassen
Typical Australian SMSF 5 different exposures to the Australian Housing Market Diversification Tim Fuller Damien Klassen
Australian Banks Diversification Tim Fuller Damien Klassen
Hybrids • Not an institutional asset • All the upside of debt, most of the downside of equity Diversification • Largest exposures in sector to banks Tim Fuller Damien Klassen
Russell Investments Australian Select Corporate Bond ETF Diversification Source: Russell Investments Tim Fuller Damien Klassen
Diversification Tim Fuller Damien 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 Diversification 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 Tim Fuller Damien Klassen
SMSFs are a great solution if you want full control. • Ability to combine assets with spouse and family • Much broader investment palette available Final Notes • Real property with limited borrowing • Higher levels of control • More flexibility in retirement • Can be cheaper than Master Trusts with higher balances Tim Fuller Damien Klassen
SMSFs are a great solution if you want full control. • You need to ensure that you have the time to spend on the management of the fund, for your own sake! • Complex tax affairs can combine well with Final Notes SMSF’s providing you have a good accountant / adviser. • With complete control, comes complete responsibility! Tim Fuller Damien Klassen
Final Notes Tim Fuller Damien Klassen
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