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.

 

  •   11 March 2020
  •      
  •   

 

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

Making sense of record high markets as the world catches fire

The post-World War Two economic system is unravelling, leading to huge shifts in currency, bond and commodity markets, yet stocks seem oblivious to the chaos. This looks to history as a guide for what’s next.

3 ways to fix Australia’s affordability crisis

Our cost-of-living pressures go beyond the RBA: surging house prices, excessive migration, and expanding government programs, including the NDIS, are fuelling inflation, demanding bold, structural solutions.

Is there a better way to reform the CGT discount?

The capital gains tax discount is under review, but debate should go beyond its size. Its original purpose, design flaws and distortions suggest Australia could adopt a better, more targeted approach.

How cutting the CGT discount could help rebalance housing market

A more rational taxation system that supports home ownership but discourages asset speculation could provide greater financial support to first home buyers.

Welcome to Firstlinks Edition 648 with weekend update

This is my last edition as Editor of Firstlinks. I’m moving onto a new role though the newsletter will remain in good hands until my permanent replacement is found.

  • 5 February 2026

It’s economic reality, not fear-based momentum, driving gold higher

Most commentary on gold's recent record highs focus on it being the product of fear or speculative momentum. That's ignoring the deeper structural drivers at play. 

Latest Updates

Superannuation

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Investment strategies

Corporate earnings show resilience against volatility but risks remain

Evidence for a strong reporting season had been piling up for months and validated an upgrade cycle already underway. However, risks remain from policy uncertainty.

Superannuation

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

SMSF strategies

Sixteen steps in a typical SMSF borrowing

Getting a mortgage is never an easy process but when an investment property is purchased in a SMSF the complexity increases significantly. Read this before taking the plunge. 

Planning

Do HNWI get better advice?

Good advisers lead to more diversification, lower turnover and less home bias. However, studies show the average adviser may not be adding much value to clients. 

Strategy

AFL Final Ten with wildcard edit 'unlevels' the field

When the new AFL season kicks off a wild-card will be added to the finals. Is this new formula fair and how does it impact the odds of winning the premiership.

Planning

Love them or hate them, it's worth understanding annuities

Investors have historically balked at exchanging a lump sum for a future steam of income. Breaking down the financial and emotional considerations of purchasing an annuity.        

Sponsors

Alliances

© 2026 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.