Speaking to SMSF Adviser, Aberdeen Asset Management global head of investment solutions Archie Struthers noted that people are typically “horrible” at timing markets.
Australians would be much better off using a multi-asset fund for the ‘core’ of their retirement savings portfolio, and then tinkering around the edges, Mr Struthers said.
“[But] people only really embrace this once they’ve been burnt,” he said.
“Behaviour is driven by experience. What will be interesting now is how things work out for people over the next few years,” Mr Struthers said.
What may have been ‘tailwinds’ for the Australian financial and resources sectors may turn into ‘headwinds’, he said.
Aberdeen’s managing director in Australia, Brett Jollie, said the typical asset allocation of an SMSF was “inappropriate for anyone looking for a diversified portfolio”.
“There needs to be greater diversification [in SMSFs], not only to enhance returns but to decrease risk,” Mr Jollie said.
“Your risk/return profile is significantly skewed when you have that asset allocation. Especially when you look at the Australian equity market.
“You’ve got a very concentrated portfolio potentially of Australian equity stocks which is going to take a big hit if banks take a downward tumble,” Mr Jollie said.
This article sounds like yet another attempt by fund managers to get their claws into your smsf. It suggests that volatility is something to be afraid of and to avoid by diversification. A share portfolio can be structured to handle and survive all possible future events but diversification is not the answer. Volatility should be welcomed as that is often what throws up the best opportunities. The famous investor and best-selling author, Peter Lynch, once described diversification as diworsification because it leads to average/ordinary results by effectively giving up your best chances to outperform.