Tuesday 18 September 2012

Are SMSF's under exposed to international stocks?

Looking at the data from the SMSF review newsletter that I receive, they state that:

471,388 SMSFs in existence
901,285 SMSF members
$438 billion in assets
29.9% is in listed shares
30.5% is in cash and term deposits
15.1% is in direct property

The latest information I could find regarding direct international shares was that less than 1% of SMSF's total investments were in direct international shares and only approximately 8% of SMSF assets were available for other investments of which international exposure was in that basket.

Are the SMSF's investing too much in Australia which is such a small part of the world economy and is highly exposed to just digging holes and reselling over priced houses?

Perhaps due to the fact that I travel the world with my job as a international pilot, I see a very narrow focus of the typical Australian investor, professional or amateur.

I worry that the average SMSF which generally holds large amounts in banking stocks, some big miners and a good proportion in cash may underperform the average industry fund over the next few years. The industry funds generally have a higher international exposure and if our housing market slows, China slows and cash rates reduce to lower single digits then the average "punter" SMSF may struggle to keep up.

Conversely, the average SMSF is usually less exposed to the chronically low bond yields currently seen around the world.

Whilst Aussie government bonds may still have some upside, the average global government bond is very much as Buffett described "return free risk". The lack of exposure to these overpriced bonds may cushion the SMSF sector compared to the average industry fund which probably holds higher amounts of these significantly overpriced assets.

1 comment:

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