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4 December 2024

Home / White Papers 2021

Why SMSFs are making changes to asset allocation splits

With interest rates expected to stay low over the next few years and bonds delivering negative returns after inflation, traditional asset allocation for retirees may no longer work as well as it has in the past.

Recent research indicates SMSFs have continued to make substantial changes to their asset allocation throughout COVID-19, with SMSF investors tending to adopt a more aggressive stance than they did in early 2020. The trend is looking set to continue with 49% of SMSFs having expressed an intention to reduce their allocation to cash and 42% looking to increase their growth exposure within the next 12 months.

Picking next year’s winning stocks with any certainty is impossible. The good news is that with ETFs, you don’t necessarily need to. Equity ETFs can be a one-stop-shop, delivering instant diversification for an investor looking to increase their growth allocation, and alleviating the need to pick individual investments.

And given the proliferation of new products, including more targeted exposures with high growth potential, in addition to traditional broad market exposures to Australian and global equities, as well as fixed income, we are seeing SMSFs allocating larger portions of their portfolios to ETFs.

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