The simple way SMSF investors can get ahead

By Grace Ormsby

May 08 2020
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SMSF investors looking to build a prudent, well-diversified portfolio are being advised that they can do so in just a few trades.

In conversation with nestegg, Six Park’s co-founder and co-CEO, Pat Garrett, explained a simple way investors can get ahead by reducing fees and purchasing well-diversified funds.

Mr Garrett said that through exchange-traded funds (EFTs), less experienced investors can gain exposures to the world’s leading markets.

“You want diversification within an asset class and diversification across asset classes,” Mr Garrett said.

“Australian shares are an asset class, so having a high level of exposure to Australian shares might be okay if you want a significant growth, but having minimal holding is not well diversified.”

The fund manager noted that investors can still look at speculative growth assets so long as the core of the portfolio remains in well-diversified assets.

“If people want to pick stocks or play with crypto, that is fine in our view as long as outside that activity, there is a prudent portfolio to their overall investment,” Mr Garrett said.

He also highlighted the importance of selecting ETFs with lower fees, noting the quickest way to reduce a balance is through higher fees.

“Keeping your fees low, because high fees just erode returns in a really bad way.”

How to build a portfolio from scratch

Mr Garrett explained that investors who are looking to build their SMSF from scratch need to think about their long-term objectives, their risk appetite and time in the market.

“You probably want to have a good think about what the right growth defensive mix is, and then construct the portfolio through various ETFs,” Mr Garrett said.

Mr Garrett believes investors can, in just eight trades, have a broad fund that spans across Australian shares, international shares, infrastructure, property and cash.

“Within those eight trades and those eight exchange-traded funds, within those funds you’re essentially investing in 10,000s of companies across the world.

“The beauty of that is you can get instant portfolio diversification at very low cost and just manage the portfolio over time with things like rebalancing and periodic review of your situation and risk profile,” Mr Garrett concluded.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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