With the SMSF members’ tally crossing the million mark, it is about time we begin to look into where their investments are going. Any new financial strategy comes with its fair share of cynics and detractors and SMSF has not been an exception.
This said, the cynics are fast beginning to comprehend that the self-managed super fund is here to stay. After all, individuals becoming helmsmen of their own retirement planning is a novel idea.
SMSF money poured into residential real estate
There has been a lot of debate around SMSFs foray into the residential property market. It is not a light stat that $20.5 billion of the SMSF’s pan-national value has been poured into the residential real estate. This is a phenomenal 17.2% rise when seen in the year-to-year context.
‘Residential’ investments are nothing compared to ‘commercial’ investments
However, lest we be carried away, it is important to establish that SMSF investments in residential properties constitute only 23% of the total property market, where the remaining (77%) is notched up by the commercial property market.
Residential property investments are only about 3.7% of total SMSF assets
Also, as of now, this $20.5 billion is nothing, a mere speck, only about 3.7% of the total SMSF assets ($558.5 billion). This said, more and more money is expected to be put into residential real estate, with consumer sentiment getting biased towards this asset class.
Diversification of portfolio is the key
Due diligence has become all the more necessary, because we are talking about some serious investor money matters. Investors have to figure out how investment in residential property would suit their SMSF target.
Diversification is the key to SMSF investments, and members and trustees of individual SMSFs will have to keenly look forward to distributing investments among different asset classes like bonds, collectables, shares, and properties. Isn’t it a noticeable stat that only about 3.5% investors have more than 50% of their portfolio allocated to the property market?