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Disclaimer
This presentation has been prepared by Nucleus Wealth and is for general information only.
Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.
Nucleus Wealth does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, Nucleus Wealth and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise noted, Nucleus Wealth is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into accountall fees and charges but exclude the entry fee.
It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author.
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Agenda
• Some highlights from the Australian SMSF Landscape
• 2 major mistakes SMSF trustees make in asset allocation
• Some key ways to avoid making these mistakes
• Key considerations before taking the plunge into an SMSF
Tim FullerDamien Klassen
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
The number of SMSFs increased to 584,802
The number of SMSF members is 1,129,542
The estimated value of SMSF assets is $749 billion
The top five asset types held by SMSFs by value are
• cash and term deposits 37% (up from 23% in 2017)• listed shares 26% (down from 30% in 2017)• real property 9% (Flat)• Trusts 11% (Flat) • other managed investments 5%.
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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The Australian
SMSF Landscape
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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1st Mistake –Doing Nothing!
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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A concerning trend with
lower balance SMSFs
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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2nd Mistake Only sticking with
what you know
Tim FullerDamien Klassen
Source ATO SMSF Statistical Report – March 2019
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A Conservative
Trend
Tim FullerDamien Klassen
Source – Cuffelinks / Graham Hand
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Invest in what you know
Tim FullerDamien Klassen
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Invest in what you know
Tim FullerDamien Klassen
1. This is stock picking advice not asset allocation advice
2. These are books about how to find stocks that you are going to take big bets on
3. Asset Allocation is about diversifying
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Fighting your own biases
Tim FullerDamien Klassen
1. Confirmation Bias
2. Optimism Bias
3. Loss Aversion
4. Self-Serving Bias
5. Planning Fallacy
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Fighting your own biases
Tim FullerDamien Klassen
6. Choice Paralysis
7. Herding
8. Stories vs Analysis
9. Recency Bias
10.Bias Blind Spot
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Bad Timing
1. Average Retail investor underperforms by around 2% p.a.
2. Most of the gap is due to bad timing –selling low, buying high
3. It’s a natural tendency that you need to fight against – have a plan and stick to it
Tim FullerDamien Klassen
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Bad Timing
Reducing the opportunity set
Tim FullerDamien Klassen
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Diversification
Typical Australian Portfolio
1. Residential Home
2. Investment property
3. Bank Shares
4. Hybrids
5. Corporate Bond ETF
Tim FullerDamien Klassen
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Diversification
Typical Australian SMSF
5 different exposures to the Australian Housing Market
Tim FullerDamien Klassen
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Diversification
Australian Banks
Tim FullerDamien Klassen
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Diversification
Hybrids
• Not an institutional asset
• All the upside of debt, most of the downside of equity
• Largest exposures in sector to banks
Tim FullerDamien Klassen
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Diversification
Tim FullerDamien Klassen
Russell Investments Australian Select Corporate Bond ETF
Source: Russell Investments
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Diversification
Tim FullerDamien Klassen
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Diversification
Tim FullerDamien Klassen
Name Ticker VB VNQ VEU VWO SHY TLT TIP DBC GLD
Vanguard Total Stock Market ETF VTI 0.91 0.43 0.75 0.58 -0.24 -0.24 0.06 0.29 -0.1
Vanguard Small-Cap ETF VB 0.4 0.63 0.47 -0.25 -0.28 0.02 0.29 -0.08
Vanguard REIT ETF VNQ 0.38 0.38 0.36 0.57 0.55 -0.15 0.13
Vanguard FTSE All-Wld ex-US ETF VEU 0.87 0 -0.09 0.35 0.4 0.05
Vanguard FTSE Emerging Markets ETF VWO 0.14 0.03 0.44 0.42 0.17
iShares 1-3 Year Treasury Bond ETF SHY 0.68 0.66 -0.05 0.5
iShares 20+ Year Treasury Bond ETF TLT 0.72 -0.37 0.44
iShares TIPS Bond ETF TIP 0.05 0.55
PowerShares DB Commodity ETF DBC 0.28
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Final Notes
Tim FullerDamien Klassen
SMSFs are a great solution if you want full control.
• Ability to combine assets with spouse and family
• Much broader investment palette available• Real property with limited borrowing
• Higher levels of control
• More flexibility in retirement
• Can be cheaper than Master Trusts with higher balances
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Final Notes
Tim FullerDamien Klassen
SMSFs are a great solution if you want full control.
• You need to ensure that you have the timeto spend on the management of the fund,for your own sake!
• Complex tax affairs can combine well with SMSF’s providing you have a good accountant / adviser.
• With complete control, comes completeresponsibility!
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Final Notes
Tim FullerDamien Klassen
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