I have a SMSF. Now what?
After the euphoria of setting up your own SMSF comes the reality that you are now responsible for your own investments. Creating the structure is the easy bit. Now you need a written investment strategy, and you want a better return than you had in the past. So what do you invest in? What are suitable investments for your SMSF?
If you were to see a financial adviser, they would probably show you a chart looking something like this:
They would also probably advise you to invest in these asset classes from 1-100%, depending on your risk appetite.
This is based on the theory that, over a 10-15 year period, each of these investment classes will have its day. But the problem is – they may UNDER-PERFORM the rest of the time.
In fact, so-called ‘balanced funds’ have a history of under-performance.
For most people, Clime feels that this structure is inappropriate.
And the reasons are:
- Real estate is often very lumpy and can limit your flexibility. You may have to sell it at a bad time in the market. It has high transaction costs, and borrowing is subject to a lot of rules. The ATO has warned that property investing within SMSFs is on their radar.
- Cash is eroded by inflation. You need some cash in your SMSF, but it’s not an investment – it is working capital.
- Global equities present an exchange rate risk unless hedged, which is expensive. And there are no franking credits with global equities.
Consider the following: (at the time of writing) CBA’s dividend yield is 7.47% grossed up, Telstra’s is 8.7%. Compare these numbers with cash deposit rates. And of course, you get the benefit of any share price increase.
Clime invests in the best value Australian companies. Think about what these companies do. They have real estate investments. They have interests overseas. So if you think about it, through investing on the ASX you can have exposure to all asset classes. Find out more about our investment options.
These are the main reasons why we believe that investing in Australian shares is a great option for most SMSFs. But not just any ASX listed company, and certainly not in the index. Through careful stock picking, Clime has achieved superior results for investors, most of whom invest with us through a self managed super fund.