Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 348

Worried about low rates, SMSFs drop banks and diversify

SMSFs are well-known for holding substantially greater allocations to cash and Australian shares than professional investors, while being underweight fixed income and international shares. They're also known for heavy allocations to high-yielding Australian shares, particularly financials.

But new nabtrade analysis suggests some of these allocations may be changing as ultra-low interest rates start to bite, and global and domestic markets reward risk-taking behaviour.

How allocations are changing

nabtrade SMSF trustees have reduced their allocation to banks by nearly 25% over the last four years, while increasing their allocations to diversified instruments such as ETFs and international share funds.

In 2019, SMSFs were net sellers of Australian equities in the first six months, taking profits as the S&P/ASX200 rallied, then they resumed buying as prices fell in July and August. Selling into rallies and buying on price weakness reflects the contrarian behaviour we typically see from our SMSF investors.

In addition to diversifying their portfolios to reduce exposure to banks and other overweight sectors, it's likely some investors were seeking to prevent a fall in their income should a future government ban the rebate of franking credits in a no or low tax environment.

Despite the reduction in financials, which fell 5% in 2019 alone, bank shares remain the most-held stocks by SMSFs, taking the four top holdings.

SMSFs also hold larger amounts of Woodside Petroleum, Transurban and Macquarie than non-SMSF investors.

Given the preference for high-yielding bank shares, many SMSFs have missed out on one of the biggest success stories on the ASX, with only 11% of nabtrade SMSFs holding global biotechnology company CSL. CSL is now the second largest stock on the ASX (and has been the first, dependng on when the market cap is measured), up over 50% in 2019 and 250% over five years.

Those SMSFs who do hold CSL are high conviction, with an average holding of over $150,000 versus $40,000 for Telstra. SMSF holdings of healthcare stocks has increased from 6% to 9% over four years.

Telstra was sold down throughout 2019 as its price strengthened, with 38% of SMSFs holding it at the beginning of the year, and only 34% holding it in December.

SMSFs also loosened their grip on BHP, ending the year with holdings down from 5% to 4.3% despite an increase of 18% in the price.

SMSF adoption of ETFs

SMSF trustees were early adopters of Exchange-Traded Funds (ETFs) with growth continuing in 2019. At the beginning of 2020, SMSFs held $20,000 more in diversified products (including ETFs, listed investment trusts and companies and mFunds) than at the beginning of 2019, of which 58% came from net buying (42% from market growth).

SMSFs took up increasing parcels of the large fixed interest Listed Investment Trusts (LITs) brought to market in 2019. Popular ETFs and mFunds also included those with exposure to international shares and fixed income. ETFs accounted for 8% of net buys in 2019.

The start of 2020 has been marked by a return to volatility, with coronavirus fears hanging over a market that had only recently reached record highs. nabtrade SMSF investors tend to respond less to volatility than other investors, and may see price falls as an opportunity to top up on favoured stocks. Interestingly, the cash position of nabtrade’s SMSFs was largely unchanged throughout 2019, leaving plenty of trustees with dry powder should further declines in domestic and international shares present good value.

 

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade, a sponsor of Firstlinks. This material has been prepared as general information only, without reference to your objectives, financial situation or needs.

For more articles and papers from nabtrade, please click here.

 


 

Leave a Comment:

RELATED ARTICLES

Changing times as share investors settle in for the long haul

Headwinds and tailwinds, a decade in review

It’s the large stocks driving fund misery

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Taxation

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.