Volatility deters SMSF investment

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A growing number of SMSFs are increasing their cash reserves.

More SMSF trustees are keeping cash in reserves amid growing concern over ongoing global volatility and regulation, opening up opportunities for advisers, according to AMP Capital.

AMP Capital’s annual survey of its SMSF investors revealed 65 per cent of SMSF trustees are keeping cash in reserves, with on average $110,000 in cash per SMSF being held that would otherwise be invested in growth assets.

The research also showed 70 per cent of SMSF trustees are concerned by ongoing regulatory reform to superannuation, with 47 per cent of trustees planning to seek advice on how to navigate through the changes.

AMP Capital global head of marketing, digital, innovation and direct Tim Keegan said while trustees are holding more in cash to reduce risk, the heavy weighting to cash can put them at risk of not meeting their retirement goals.

“In a period of heightened regulatory change, it’s clear that many SMSF trustees are looking for help to set up the right portfolio to reduce risk while still supporting their retirement goals,” Keegan said.

“It’s an opportunity for advisers to share their expertise with new and existing SMSF clients.”

While the number of SMSF trustees seeking advice increased by 6 per cent in 2017, 63 per cent of trustees are still open to receiving further advice. Developing a retirement strategy (30 per cent of trustees), income generation (28 per cent) and investment selection (22 per cent) are the top areas where trustees are looking for advice.

The research also delved into SMSF trustee perceptions of diversification, revealing 47 per cent of trustees consider a portfolio with 20 individual equity stocks to be well diversified and more than half (53 per cent) believe a portfolio with a mix of domestic and global equities is well diversified.

But only 35 per cent of trustees feel a portfolio invested across four different asset classes is diversified.

Meanwhile, 22 per cent of trustees intend to invest in managed funds over the next 12 months, with portfolio diversification cited as one of the main reasons.

The research is based on an online survey of nearly 700 AMP Capital SMSF investors conducted by Investment Trends.

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