SMSFs investors moved away from blue-chip stocks in the 2019 financial year because of poor performance, according to an SMSF specialist.
SuperConcepts SMSF technical and strategic services executive manager Phil La Greca said 2018/19 marked the end of the “enduring love affair” between SMSFs and blue-chip stocks, with SMSF investors showing more interest in infrastructure and exchange-traded funds (ETF).
“At June 2018, ETFs represented 4.7 per cent of total assets and has increased to nearly 7 per cent by 30 June 2019, while investments in non-traditional managed funds, the primary way for SMSFs to access infrastructure, jumped from 0.28 per cent to 0.55 per cent of total assets,” La Greca said.
“SMSFs are highly engaged investors and they tend to go for investments that bring solid returns, particularly during retirement, and unfortunately the top 10 stocks had a roller-coaster ride to hell this financial year.”
He pointed to the financial services royal commission as the reason for the decline in the performance of half of the ASX 10 stocks and also highlighted the role the recent federal election played in SMSF investment decisions towards the end of the financial year.
“While the election result didn’t turn out to be as adverse for SMSFs as was predicted based on Labor’s failed franking credit policy, many SMSFs assumed like the polls that the election result was a done deal for Labor,” he noted.
“We saw during the campaign that many SMSFs were reluctant to commit further if they weren’t going to get a decent return from the franking credits. Worse, we saw a lot of people doing a sports-bet style of decision-making and were selling out early in anticipation of an election result that never happened.”
He also said an analysis of end-of-financial-year trends had shown a bump in personal concessional contributions.
“Last year we saw a surge in personal deductions in June because individuals could get a tax deduction,” he said.
“In the 2018 financial year we saw 47 per cent of the contributions came in the June quarter and that pattern is on track to exceed that number because even more people are now aware of this option to generate a personal tax deduction.”