SMSFs told to shake up investment expectations
Investors are being told to lower their expectations of the traditional double-digit levels of return in this low-growth environment, and instead focus on income.
Speaking to SMSF Adviser, FIIG Adviser Services national manager Simon Michell said the double-digit returns that investors previously benefited from are "unrealistic in the near and medium term".
"We’re seeing very low investment returns right across the markets, and people really have to reassess their view of what they see as a prudent level of performance in investor markets," said Mr Michell.
"Investors need to focus on income and look at those investments and asset allocations that are going to provide a stream of income that you can utilise for performance or to meet lifestyle needs during retirement."
In the current markets, Mr Michell said there is a lot of incentive to generate higher returns by taking on more risk, and that a lot of investors don’t understand the risks they are taking on.
He warned that simply leaving the bulk of the fund in cash could also be damaging to the portfolio in the current environment.
He said that looking at the interest rate market, everything suggests that rates will continue to remain low.
"We certainly have a view that even in a low interest rate environment you still need to put your money to work, there is a huge opportunity cost of not and sitting in cash, and cash has continued to underperform as rates have fallen," he added.
"It’s a low rate environment, if you can lock in a decent return, with some certainty focus on income, that’s a good place to be for the next couple of years."
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.