An investment roadmap for seniors
MANY seniors operate their own superannuation funds, so it's interesting to see some new data showing where most of the people with DIY funds are investing.
Australia's largest online broking platform CommSec has done just that, analysing the investing habits of thousands of different self-managed super funds (SMSF), who collectively manage billions of dollars in assets. CommSec has identified some quite interesting trends.
The first is that a growing number of SMSF trustees are broadening their share exposures to companies outside of the top 20 companies listed on the Australian Securities Exchange, including into international stocks, either directly or through exchange-traded funds.
While most of those with their own super funds still have large exposures to the biggest Australian companies, they are also diversifying into smaller stocks.
SMSF investors have also been actively selling stocks that have had strong gains over the past 12 months, suggesting that many view them as fully valued.
Meanwhile, a rising market has seen overall SMSF trading activity rise, with the total value of shares traded up 2.1 per cent and volumes up 5.8 per cent, resulting in the average deal value falling more than 3.3 per cent. Notably, the average deal size of ASX20 trades has dropped by 10.8 per cent.
Here are CommSec's key findings from trading data between January 1 and June 30 this year -
SMSFs are still looking beyond the top 20: Frustrated by the underperformance of many of the large blue-chips that have traditionally been among their favourite stocks, SMSF investors have continued to turn to a more diversified group of mid and small cap companies.
SMSFs have become blue-chip bargain hunters: At the same time, many SMSF investors have taken advantage of share price weakness to snap up blue-chip shares with a history of strong dividends at bargain basement prices.
SMSFs are using exchange traded funds to diversify: Exchange traded fund (ETF) holdings continue to grow, as investors use ETFs to diversify offshore and into other asset classes.
International listed investment companies and listed investment trusts are increasingly popular: Internationally focused listed investment companies (LICs) and listed investment trusts (LITs) have carved out a significant niche as investors seek out diversification opportunities.
Direct international share trades continue to climb: From a low base, the value of direct international share trades by SMSFs has jumped more than 57 per cent over the last year, with a growing focus on Chinese equities.
CommSec notes that SMSF investors are becoming increasingly diverse and sophisticated in their investment choices.
"While their portfolios are still heavily weighted towards larger stocks, SMSFs are also looking beyond the ASX20, as well as taking advantage of market dips to buy into blue-chip shares at a bargain price."
"Only time can tell whether these value-based trades will play out as planned. Meanwhile, our analysis shows that SMSFs have continued to invest across the wider market and to actively trade in fast-moving sectors in search of new growth opportunities."
Despite these trends, the list of stocks most traded by SMSFs has remained largely unchanged over the last six months, with only a few significant shifts. The top three most traded stocks by value remain Commonwealth Bank (CBA), Telstra (TLS) and National Australia Bank (NAB) although they now account for a smaller proportion of trades overall - 13.8 per cent, down from 15.5 per cent six months ago.
At a portfolio level, the average number of stocks held by SMSFs is 11.9 stocks. SMSFs remain considerably more diversified than other investors, with the average number of stocks held by non-SMSF investors 4.9.
An analysis of the top 12 exchange-traded funds (ETFs) traded by value shows SMSFs increasing their exposure to currency and property, as well as international equities. The strength of this shift suggests it is being driven by a desire for greater diversification, rather than simply the relative performance of different markets.
Tony Kaye is the Editor of Eureka Report, which is owned by listed financial services company InvestSMART.
For more go to investsmart.com.au.