Self-managed super fund (SMSF) investors have minimal exposure to international shares and are missing out on potential diversification and risk-reduction benefits, according to Crystal Wealth Partners.
The March 2013 Multiport SMSF survey indicated approximately seven per cent of SMSF money is invested internationally, however Australian Taxation Office (ATO) figures suggest SMSF assets held in international shares could be as low as one per cent, Crystal Wealth executive director John McIlroy told SMSFAdviser's sister title, InvestorDaily.
Limited exposure to international stocks for SMSFs has “always been the case,” according to Mr McIlroy, who added it’s an asset class that SMSFs generally are not accessing.
SMSF trustees are not investing in global stocks because many believe it can be difficult, cumbersome and expensive from a trading point of view Mr McIlroy said, adding SMSFs are missing out on the potential “upsides” of international exposure.
Mr McIlroy said with SMSFs there’s a “diversification” benefit with investing in global stocks, which can in turn reduce risk exposure. He also said SMSFs can potentially benefit from any fall in the Australian dollar through investing in international shares.
“Investing in a concentrated portfolio of exceptional dividend growing companies, with an absolute value bias, will generate attractive long-term returns with less than average volatility,” Mr McIlroy added.
Mr McIlroy also said by using a managed account approach rather than a managed fund, investors will get a “much different” tax outcome as the individual stocks are owned by the SMSF.
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