Thoughts on my SMSF portfolio

Discussion in 'Other Asset Classes' started by Cadbury99, 21st Jun, 2015.

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  1. Cadbury99

    Cadbury99 Well-Known Member

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    Below is the makeup of my SMSF portfolio, just wondering if anyone has any comments. I decided to stick 100% to ETF's in SMSF. I've been running this SMSF for just over 2 years and it has returned a little over 16% p.a. after expences. It was around 20% before the recent market pullback.



    Symbol Company Name %
    IEM iShares MSCI Emerging market ETF 5%
    IJR ishares US Small cap 7%
    ILC iShares S&P/ASX 20 3%
    IOZ iShares MSCI AUS 200 27%
    IVE iShares MSCI EAFE ETF 8%
    IZZ iShares CHINA ETF 7%
    RCB Russell Aust Corp Bond ETF 3%
    STW SPDR 200 FUND 16%
    VAF Vanguard AUS Fixed interest 2%
    VAP Vanguard A-REIT 11%
    VTS Vanguard US Total Market 10%

    To summarise

    Aust Equities 46%
    International Equities 38%
    Aust Property 11%
    Aust Fixed Interest. 4%

    There's also a small amount of cash (about 1% of value of portfolio).

    I have still have an industry super fund with another 15% spread across Aust small caps and international property. I kept this for a number of reasons; access to cheaper life insurance, Aust small caps seem to do better with active management, no international property ETF.

    My wife and I are members and still have at least 5 years before we can/will need to access it. The balance does not currently meet our retirement requrements so it still very much a growth focused portfolio. We have a property portfolio mostly in my personal name for which the plan is to rely on once the super runs out.


    Also does anyone one have any strategies to limit losses if we have a market downturn without moving everything into to much lower return assets (e.g. Bonds). Anyone tried options as protection in an SMSF?

    Thanks in advance.
     
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  2. The Falcon

    The Falcon Well-Known Member

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    Good looking high growth model portfolio. Out of interest, what yield is being achieved, and how far away is that from the amount you need to cover your living expenses?
     
  3. Cadbury99

    Cadbury99 Well-Known Member

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    Yield since inception has been 3.85%

    It's a long way off being able to cover living expenses, the overseas securities in particular do not return a high yield. It would need to triple to cover basic expenses.
     
  4. The Falcon

    The Falcon Well-Known Member

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    Got it. Super and SMSF in particular is a huge subject area that I have only a limited knowledge of, so these comments are from a mug punter. Have you had specific SMSF / Tax advice with regards to your other assets? I think this could be valuable if you havent.

    From the looks of things you are doing everything right (incl. using the industry super funds cheap insurance :)), the asset allocation looks good given your circumstances. Portfolio size is the issue here, I would be loath to suggest changing asset allocation because reducing growth assets now isn't going to help you. I have no idea about short term market movements, but believe with 30+ years you will want your SMSF to last that you should stay fully invested in growth assets given your current portfolio size, and do whatever you can to increase your "work" income, and salary sacrifice as much as possible in coming years. No magic bullet here I am afraid. My 2 cents only. Good Luck mate :)
     
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  5. Jack Chen

    Jack Chen Mortgage Broker Business Member

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    Holy smokes thats alot of funds. I've only got one fund to cover all of my international exposure, VGS.

    But I'm also heavily weighted towards aussie equities in the form of the large traditional LICs for the stable and tax advantaged income stream.
     
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  6. Cadbury99

    Cadbury99 Well-Known Member

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    Thanks for the feedback - I found an absolute gem of an accountant so am fully covered in terms of tax advice. I took some financial advice before I started the SMSF but they told me nothing that I didn't already know and charged a motza for the privelege. I do take pleasure in tracking my SMSF against their high growth fund and see mine beat it every month.

    In terms of increasing my work income; first challenge is to have a job - I was retrenched late last year and am in no rush to go back to work.
    Luckily I have a good size property portfolio outside of super and after 15 years of loyal serice I got a good payout. I just have to be patient and wait for the CG to occur.
     
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  7. Cadbury99

    Cadbury99 Well-Known Member

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    VGS is a fairly new fund, it only listed in Nov last year. I just had a quick look at it, it appears highly weighted to large US companies, followed by Europe and Japan and not much else. I picked the ETF's in my SMSF to have more diverification than that.

    I don't think having 11 different ETF's is a particularly large number and gives me flexibility to adjust the assett allocation as the markets change. For instance i placed quite a high allocation overseas as it appeared fairly obvious the AUD was going to drop vs USD. I think it will still go further, but when I think it has bottomed out I will probably reduce US exposure.
     
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  8. Coolcup

    Coolcup New Member

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    Would you be able to share their details via PM? I am looking for one as we speak, and noticed you are in Sydney so would be good to get a recommendation!
     
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  9. Cadbury99

    Cadbury99 Well-Known Member

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    Wasn't sure how to PM on propertychat so I created a one on one conversation with you. Perhaps that is the equivalent of PM'ing on propertychat.
     
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  10. Redwing

    Redwing Well-Known Member

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    Definitely not a simple 3 or 4 fund portfolio :)

    There would be a lot of double up of stocks within (i..e ASX 20, MSCI & SPDR ASX 200, A-REIT) is the goal with so many funds to reduce volatility or..?

    MSCI Emerging market ETF 5%
    US Small cap 7%
    S&P/ASX 20 3%
    MSCI AUS 200 27%
    MSCI EAFE ETF 8%
    CHINA ETF 7%
    Russell Aust Corp Bond ETF 3%
    SPDR 200 FUND 16%
    Vanguard AUS Fixed interest 2%
    Vanguard A-REIT 11%
    Vanguard US Total Market 10%
     
  11. Cadbury99

    Cadbury99 Well-Known Member

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    Yes for divercity and therefore (in theory) less volatily. My expererence so far shows it to be working. It's also worth noting that there is a certain reliance of ETF issuers doing the right thing, spreading ETF's across multiple ETF providers is a form of risk mitigation.

    There is some double/ triple up in the Aussie funds.
    I have IOZ and STW as I'm a bit undecided which is best. Both track very similar indexes, main difference between indexes is (i think) that STW includes News Corp with IOZ does not. STW has bi-annual dividends, IOZ quarterly. IOZ has lower fees. STW tracks the index better as it is highly traded, IOZ less so.
    I added some ILC late last year when my thinking was that the big companies were going to better than the smaller one.

    Not sure why people comment that this is a large number of funds. If I tried to do this with individual shares I'd have to have dozens of holdings.
    It's not hard to track 11 ETF's.

    I use sharesight to keep a track of them although shortly I'll probably drop that in favour of a system called class which my accountant uses. It will get direct feeds from banks etc. so keeps track of nearly everything automatically.
     
  12. See Change

    See Change Well-Known Member

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    We've protected our SMSF from a downturn in the share market by investing in property ...

    I saw numerous people's retirement plans crucified by the GFC

    Cliff
     
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  13. Pier1

    Pier1 Well-Known Member

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    Bump, would love to see an update, still holding same and any learnings along the way?
     
  14. Cadbury99

    Cadbury99 Well-Known Member

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    So much has happened since then. I was retrenched, wife got very sick and passed away in April 2016. I decided I like not working so decided to retire, although I can’t access my super for another 5.5 years.
    I still have the SMSF but with just me as a member, and just under a third of it (my late wife’s super) is in the form of an income stream. I also still have some funds in an industry fund.

    Current allocation

    CBA Commonwealth Bank 0.85%
    ILC Ishares S&P/ASX 20 2.39%
    IOZ Ishares S&P/ASX 200 29.03%
    NAB National Aust. Bank 2.73%
    STW Spdr 200 Fund 21.08%
    IEM Ishares MSCI Emg Mktetf 5.19%
    IJR Ishares Small Cap 5.23%
    IVE Ishs Msci Eafe etf 7.40%
    IZZ Ishs China Etf 6.09%
    VTS Vngd Us Total Market 5.68%
    VAP Vngd Aus Prop Sec 10.10%
    RCB Russaustcorpbondetf 2.10%
    VAF Vngd Aus Fi 1.43%
    Cash Cash in Bank 0.72%

    Summary

    Aust Equities 56.08%
    International Equities 29.58%
    Aust Property 10.10%
    Aust Fixed Interest 3.53%
    Cash 0.72%


    As you can see I have a couple of single stocks, both banks currently. These are small holdings and are just me buying in the dips. There have been some others which I have bought and sold at a profit, often in a short time period. Keeps me interested.

    My biggest mistake was that until recently and for about a year I held HVST, around 7.5% of the holding. It basically returned the capital losses in dividends and I eventually ran out of patience. I moved that investment to STW.

    The best outcome I had was where I sold 99% of my US holding in late August 2016 and bought back in early Nov. Thankyou Donald.

    Total returns since fund was formed in April 2013 - 10.87% p.a.
    Had a crap year April 15 - April 16 but other that period returns have been good.
    SMSF investment plan from the beginning stated the aim was to produce in excess of 10% per annum somfar so good.

    In terms of the size of the fund, if it continues to grow as it has so far then it will easily fund my needs when I can finally access all of it. Also I plan to sell down some property holdings and put the profits into the fund. I think I’ll end up paying some tax in retirement because of the new 1.6M limits.

    I’m marrying my young fiance next year so the fund will need to cater for both of our needs (she has a small balance and is unlikely to be able to contribute enough to ever make it large) for both my and her lifetimes (she may well outlive me).

    It’s all going well.
     
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  15. MWI

    MWI Well-Known Member

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    Thank you for sharing all, your loss, your investing update, and your new life experiences. Wishing you all the best!
    I cannot comment on stocks or ETFs as I sold out quite few and am very heavily exposed in property even in my Super (both I and my partner exceed $1.6 million limits - the aim was to build $10 million portfolio in SMSF but rules keep changing and so we change investing too!). By the way, the Super balance was built all with our own approach investing and CC (concessional contributions) not NCC (Non concessional contributions) hence I cannot agree on the young fiancé not having more, it really depends on investment approach, timing, rules, etc....! I should mention that I have had the SMSF since 1995 and have been actively involved myself, hence I attend lots of information sessions, but decide what I invest into directly.. I think I am against the 99% of what most people do with their SMSF, just my side of the story!
    The only protection I was educated on was to protect your capital, hence I used to set up stop losses when directly investing into shares (say like your bank shares - e.g. each day you would sit down and set the stop loss, say you maybe comfortable with 10% or 15% or 20% loss so you would adjust the sell price). Some work involved but if your portfolio was in millions worth doing instead of having sleepless nights....No one has crystal ball and some of my friends lost lots of capital during GFC!
     
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  16. Pier1

    Pier1 Well-Known Member

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    Words are just that, words, but sorry for your loss and appreciate your candid response.
    Just goes to show have a plan and stick to it, will never be perfect but better than doing nothing.
     
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  17. BarneyRubble

    BarneyRubble Well-Known Member

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    Unfortunately though, stop losses don't work in a crash.

    Using CBA as an example, it closed Friday at $80.92

    If you have a stop loss order for 10% less, say $73 and the market crashes more than 10%, your order will not be triggered and you will be left holding the stock.

    Reason is, there was never a buyer at the stop loss price. Let say the market crashed 12%, the first buyer would be at $72.21

    MWI, appreciate you know this with your comment about making daily adjustments. Reason for the post is to ensure others realise stop losses alone cannot offer protection, and even daily adjustments are likely already too late.
     
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  18. Cadbury99

    Cadbury99 Well-Known Member

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    Not sure which provider you use but stop losses don’t typically work that way. Certainly my provider’s stop loss doesn’t.
    The stop loss is triggered if the price falls below a certain price. The order type that is triggered is an at market order so will match with any buy orders.
    So you could sell at a massive loss. You will not end up with the stock provided there are any buyers on the other side. For highly liquid stocks there is unlikely to be a massive gap between the stop loss and actual price but there could be.

    I have used stop losses in my personal trading but have so far steered away from doing so in my SMSF. SMSF is a long term thing so I have time to ride out losses and will continue to receive the dividends even if the price goes down.

    Totally agree that stop losses are not a panacea to avoiding big losses.
     
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