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Fragile SMSF investor sentiment lingers

Investor sentiment among SMSF investors and trustees remains fragile, but there are signs of improvement relative to 2011, according to a recent Investment Trends report.

The December SMSF Investor Intentions Index showed the average concern level among SMSF investors was 6.4 out of 10, which compared to a peak of 7.6 during the global financial crisis. However, it had not been a gradual decline in concern levels and fear tended to return with every fall in the stock market, Investment Trends chief operating officer Eric Blewitt said.

“The last spike in concern occurred towards the end of 2011 as Europe’s debt situation loomed to escalate – a sign of fragile investor sentiment,” Blewitt said.

Against this backdrop, SMSF investors held the view of an expected capital return, excluding dividends, of 5 per cent over the coming 12 months from the All Ordinaries index with a similar expectation over a five-year period.

When it came to specific asset classes, the recent historical picture of SMSF investors willing to hold and accumulate term deposits and cash appeared to be slowing, as only 7 per cent of SMSF investors intended to increase allocations compared to 14 per cent in December 2011, the report said.

Six per cent intended to decrease their allocation.

In addition, a significant number of trustees still wanted to maintain their term deposit and cash allocation.

The report also found some green shoots of optimism, with 47 per cent of SMSF investors perceiving Australian blue chip stocks to be undervalued.

“This translates to the Australian allocation index sitting about the 12-month average, with 44 per cent of trustees intending to increase their allocation to Australian equities over the next month and only 12 per cent intending to decrease,” Blewitt said.

“On the property front, the love affair with residential property continues to be under pressure, with 51 per cent of trustees seeing it as overvalued or highly overvalued, which is broadly consistent for the last six to 12 months.”

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