Kristian Tribuiani, executive adviser for Viridian Advisory, told SMSF Adviser that almost two out of three SMSFs are invested in Australian shares due to the companies being familiar household names and growth potential, but more importantly, the strong dividend income and franking credits they provide.
Tribuiani said recent cyber security breaches of larger funds have also seen a growth in the SMSF sector, with more people wanting greater control over their retirement assets.
“If someone has the right financial knowledge or a trusted team around them to help manage a more complex structure like an SMSF, it can be an extremely effective way to help secure retirement with the appropriate strategy and investment mix,” he said.
With the predominance of big super funds’ investments in overseas stocks now being seen as a detriment as potential trade wars become more of a reality, SMSFs should be looking to minimise their exposure to overseas stocks, Tribuiani said.
“We would suggest that calling the predominance of investment into overseas stocks a mistake is short-sighted, given that as of today (7 April), the impact of tariffs has only resulted in giving up the last year’s gains in most stock markets.”
“The S&P 500 is still up 81.88 per cent over the last five years, and the Nasdaq 100 is up 111.17 per cent over the same period. Overseas stocks have proven to be highly lucrative for investors, regardless of whether it’s within super or not, even after recent volatility.”
However, he added, this highlighted the importance of having a diversified asset allocation and not being overexposed to any particular asset class.
“Another key consideration is ensuring you’re comfortable with the level of risk you’re taking, the assets you own, and having control over asset allocation and asset type — something that is often limited in larger super funds.”
“We’ve seen a strong rally in assets like gold recently, which has provided a cushion for portfolios, especially in uncertain times like we’re currently seeing. These types of assets, whether physical gold or a gold ET,F are commonly held within SMSFs, along with ASX equities that offer strong income levels, helping to support performance during challenging periods.”
In the latest reporting period, roughly 75 per cent of companies that reported either met or exceeded market expectations.
“This suggests many companies remain in good shape and are likely to continue paying strong dividends — an important factor when managing market volatility, particularly for those relying on recurring income to support their lifestyle.”
He continued that although ETFs became popular over the last decade and saw high inflows, they are not actively managed, so investors tend to experience the full effects of market volatility.
“There’s usually no fund manager making tactical decisions or moving in and out of markets, as these types of investments typically rebalance quarterly or semi-annually in line with the index,” he said.
Private equity is another common asset within the SMSF environment, but Tribuiani said it is not immune to a situation as is being seen with tariffs.
“Its profit/loss may be affected but these assets are generally valued via a multiple of EBITDA, which reduces the risk of large short-term asset value reductions due to market sentiment or conditions like we are seeing at the moment,” he said.
“However, a challenge with private equity is its illiquid nature and seeing out an optimal investment period for ROI with it being very hard to rotate out of illiquid assets quickly.”
