SMSF investment decisions in FY 19 revealed the end of an era with blue chip stocks unloaded due to poor performance, according to an SMSF investment specialist.
“FY19 marks the souring of an enduring love affair between SMSFs and blue-chip stocks,” said Phil La Greca, SuperConcepts Executive Manger SMSF Technical and Strategic Services.
“We saw huge swings away from low growth mature Blue Chips towards Infrastructure and ETFs in FY19.
“At June 2018 ETFs represented 4.7% of total assets and has increased to nearly 7% by 30 June 2019, while and investments in non-traditional managed funds (the primary way for SMSFs to access infrastructure) jumped from 0.28% to 0.55% of total assets,” said Mr La Greca.
S&P YTD changes as at May 2019
ASX 200: 13.29%
ASX 20: 12.5%
Financial services: 10.3%
Consumer staples: 6.98%
“SMSFs are highly engaged investors and they tend to go for investments that bring solid returns particularly during retirement, and unfortunately the top 10 stocks had a roller coaster ride to hell this financial year,” said Mr La Greca.
“Half of the ASX 10 stocks felt a negative impact from the Royal Commission into Banking and Financial Services, which lowered share values and corresponding dividends.
“While the election result didn’t turn out to be as adverse for SMSFs as was predicted based on Labor’s failed franking credit policy, many SMSFs assumed like the polls that the election result was a done deal for Labor.
“We saw during the campaign that many SMSFs were reluctant to commit further if they weren’t going to get a decent return from the franking credits. Worse, we saw a lot of people doing a sportsbet style of decision making and were selling out early in anticipation of an election result that never happened.
“Outside of the banking sector SMSFs questioned the sustainability of Telstra earnings and dividend streams, while the retail sector experienced continued pain from wage stagnation that impacts consumer spending. “
Concessional Contributions expected to show Bump for June
“A preliminary analysis of EOFY trends is showing an expected bump in the concessional contributions on the personal level rather than employee level.
“Last year we saw a surge in personal deductions in June because individuals could get a tax deduction.
“In FY18 we saw 47% of the contributions came in the June quarter and that pattern is on track to exceed that number because even more people are now aware of this option to generate a personal tax deduction,” said Mr La Greca.