My SMSF – the importance of a Plan B

Print This Post A A A

Key points

  • The yield-seeking trend will end when interest rates start going up (but this won’t happen for 12 to 18 months).
  • The Aussie dollar should fall during this year, which means an exposure to US shares could be wise.
  • Consider offloading other holdings that aren’t doing well.

What’s going on?

Many SMSF investors with direct equity portfolios might soon be in for a shock. About half of our ASX 200 index is accounted for by the so-called high-yield sectors (financials, property, telcos and utilities). It so happens that an index of just these four sectors (with market capitalisation weights) out of the eleven sectors of the ASX 200 outperformed the broader index by an average 7.6% over the last four years – and the worst outperformance in that period was as high as 6.6%! If dividends – but not franking credits – were reinvested, the average outperformance rises to 9.8% with the lowest outperformance being 8.3%.

It follows that anyone focused on picking a yield portfolio from these sectors in recent years would have found it hard not to outperform the ASX 200! A dart board, twenty darts and a list of the top 100 stocks from those sectors was unlikely not to have produced a superior performance in each of these last four years.

Also from this edition