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Can 1.1 million Australians be wrong about their SMSF?

The latest official statistics about SMSFs show that there are 1,120,117 Australians in their own self-managed superannuation fund (SMSF).  That is a lot of people investing a huge amount of money.  So how are 1.1 million people investing?  Here is the latest total allocation of SMSF assets.

 

The above chart is the average across all SMSFs.  There will of course be great variation between funds.  How is your SMSF invested?  Or, if you had your own SMSF would you invest your money in this (average) way?

 

The great thing about having your own SMSF is that you control the investment decision making, for better or for worse.  Another name for Self-Managed Superannuation Funds, is DIY super funds.  That’s OK because a lot of us want to do our own things.  But does doing your own thing work for you?  Are you getting the investment returns your hard-earned money deserves?  The answer, unfortunately, for most SMSFs is, NO!

 

Official statistics, coupled with our adjustments for tax and investment fees  show that for the previous five years to 2015.  On average, SMSFs:

  • With less than $200,000, (approximately 20% of all SMSFs) underperformed a “balanced” investment strategy abysmally, averaging 8% points each year!
  • With between $200,000 and $500,000, (approximately 25% of all SMSFs) underperformed by an average of 4% points each year.
  • With between $500,000 and $1million, (approximately 25% of all SMSFs) underperformed by an average of 2% points each year.
  • With between $1 million and $2 million, (approximately 18% of all SMSFs) underperformed by an average of 1% points each year.
  • With $2 million +, (approximately 12% of all SMSFs) outperformed by an average of only 0.25% points each year.

 

Here is the picture.

Why are SMSFs, on average, underperforming so badly?  Also, why is there such a skew to excruciating underperformance for small funds?

There is a combination of reasons, all of which are fixable with good advice and good management:

  1. High administration fees.
  2. Poor investment strategy (asset allocation).
  3. Poor investment selection.

At InvestAstute we have 30 years’ experience in investment and superannuation and we address all three of the above problem areas.

 

Nick Nedachin is the Managing Director at InvestAstute Pty Ltd.  He can be contacted at nick@investastute.com.au or on (02) 9929 5125.

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