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Fears of volatility a barrier to SMSFs’ retirement dreams

As concerns around volatility and regulation increase, SMSFs’ decisions to increase their cash allocations could have serious consequences.

AMP Capital’s latest analysis has revealed that SMSFs are increasing their cash reserves and, in doing so, potentially falling short of their retirement goals.

“In a period of heightened regulatory change, it’s clear that many SMSF trustees are looking for help to set up the right portfolio to reduce risk while still supporting their retirement goals,” said AMP Capital global head of innovation and direct Tim Keegan said.

Regulatory changes to superannuation and global market volatility continue to be a concern for SMSF trustees. As a result, many investors are increasing the amount of money held in cash as a risk-reducing strategy.

“However, with a heavy weighting to cash, trustees could be at risk of not meeting their retirement goals,” Mr Keegan said.  

According to the annual research, 65 per cent of SMSF trustees are holding cash in reserve due to fears of global volatility, with an average $110,000 in cash held by SMSFs that would otherwise be invested in growth assets.

Further, 70 per cent of trustees said ongoing regulatory reforms to superannuation are concerning.

Forty-seven per cent of trustees think a well-diversified portfolio has 20 individual equity stocks, while 53 per cent consider a portfolio with both domestic and international stocks as well-diversified.

Nevertheless, just 35 per cent of trustees think a portfolio possessing four different asset classes is diversified.

To Mr Keegan, these numbers suggest a potential risk of equities concentration for SMSFs.

“It’s important to not only consider diversification in the equities held but also across different asset classes, including infrastructure and property, for example,” he said.

Fears of volatility a barrier to SMSFs’ retirement dreams
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