Other members of the SMSF: Partner Fiona, and two of my adult children.
Unfortunately, as you can’t have five members, my oldest daughter is not a member – she is in a government scheme and is reasonably well provided for.
My younger children joined last year. They are university students, who work part time – and I got sick of seeing their contributions eaten away by fees and insurance premiums. This is one of the great scams of the default industry super fund regime (thanks, Bill Shorten) – that people without dependants are forced to invest their super in life insurance.
How long have you had your SMSF?
While I have always been really interested in this area, I didn’t start my SMSF until four years ago when I left the Commonwealth Bank. The bank’s sponsored super scheme was well run, had good investment options and was particularly cost effective – so there wasn’t a lot to be gained in having my own SMSF.
Why did you start it up?
Leaving the bank gave me the opportunity to really think about super – and triggered me to take some action.
How big is it?
About $1.5 million.
Is it more or less difficult to manage than you thought it would be?
No – although it does take some time.
Do you enjoy managing it?
Yes – although there is a fair bit of administration.
Are you pleased with its performance?
Yes, it has done particularly well over the last year. I haven’t crunched all the numbers yet for the 12 months to 30 June, however I think it will do around 25% after tax – the average balanced fund will do about 15% for the year.
What is your asset allocation?
- Australian equities 55%
- Cash, term deposits, hybrids: 35%
- Property: 8%
- International equities 2%
I would like a higher allocation to international equities, however I didn’t listen to my own advice and invest more when the AUD was around $1.05 USD. More recently, I have been buying companies such as CSL, which will benefit from a lower AUD.
On the fixed interest side, I am a mega bear on long bonds – so all our exposure is through floating rate hybrid issues that re-price every 90 days.
With our equities portfolio, it looks a little like the Switzer Income Oriented Portfolio. We have about 25 stocks, with a sector allocation as follows:
What are your favourite investments/stocks and why?
There are two absolute standouts – Commonwealth Bank and Ramsay Health Care. CBA – floated at $5.40 in 1991 (now circa $71.00), dividend increased from $0.40 to circa $3.50 per share. With Ramsay, have a look at the share price graph over the last 10 years – phenomenal. CSL is not too bad, either.
What investments do you have outside of superannuation?
Shares (very overweight CBA), plus an investment property. I haven’t brought the shares into the super fund yet because of the capital gains tax – obviously, I will look to do this at some stage.
Do you use an advisor or any kind of service provider?
I do it all myself – including the accounting. I am in the 1% of trustees who don’t use an accountant or administrator – and I don’t recommend this to others.
I do it because it helps keeps me in touch with the issues that accountants face in working with their clients. I use specialist SMSF software from BGL (which many accounting firms also use), with its double entry “debits and credits”. I create an accounting file and send this to my auditor (the only external provider).
Of course, I also leverage the ideas and advice from all the expert contributors to the Switzer Super Report. Even if I disagree with an expert on a particular point, that is helpful as it encourages me to re-examine and confirm any actions or decisions I have made. As an investor, I think this is a really good discipline.
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Also in the Switzer Super Report:
- Charlie Aitken: East coast property to go boom boom boom
- JP Goldman: The only way is down for interest rates
- Roger Montgomery: Roger on risk
- Gavin Madson: Bonds v equities – it’s all relative
- Paul Rickard: Question of the week – time to consider international