Investment control not leading to more trades

SMSF investments control

SMSFs set up for the purposes of investment control tend to trade at the same rate as those established for other reasons.

SMSF trustees who set up a fund to gain more control over their investments tend to buy and hold investments at the same level as those who establish a fund for reasons unrelated to control, according to a financial services research firm.

Investment Trends research director Dougal Guild said the group’s annual survey of the SMSF sector asked trustees what were the main reasons for establishing a fund and many respondents listed control over their investments as the leading reason for doing so.

“This had been the number one reason for many and reasonably consistent across all of the SMSF establishment timeframes,” Guild said during a presentation at the Chartered Accountants Australia and New Zealand National SMSF & Financial Advice Conference 2022 in Sydney today.

Guild said the trustees of more recently established funds were very confident in their ability to achieve better returns by managing their own superannuation, but when Investment Trends looked at their responses regarding investment trades, it found they were not frequent traders.

“There is a perception that control over investments means that SMSF investors are going to go crazy on the market and buy and sell and day trade, but the research shows that is absolutely not the case,” he said.

He said this was ascertained by asking SMSF trustees, including those who set up a fund for investment control reasons, how often they were trading, with the “vast majority of those SMSFs suggesting control was the main reason that they set up their fund, effectively buying and holding investments”.

“A relatively small portion of those are actively trading, but the vast majority are buy and hold and what is interesting is that their responses are actually very similar to those SMSFs who didn’t cite investment control specifically who are effectively saying the same thing [regarding the frequency of trades],” he said.

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