SMSFs are continuing to expand their investment offshore with a 30 per cent increase in international share trades for the first half of the year, according to the latest CommSec SMSF Trading Trends Report.
With direct share trading in international shares becoming easier, and international companies now an unquestioned part of everyday life, adding an Apple or a Facebook to an SMSF portfolio has become an increasingly attractive investment option for SMSFs.
Marcus Evans, Head of SMSF Customers for Commonwealth Bank said: “This trend to add international shares is strong among SMSFs who often use a core portfolio of Exchange Traded Funds (ETFs) or managed funds for diversification, then add high conviction individual stocks such as Facebook, Amazon, Apple, Netflix, Google or Berkshire Hathaway in an effort to enhance performance.”
The CommSec report shows investment in ETFs with an international focus continued to increase in 2018, with SMSFs using this investment option to increase their exposure to currency and property offshore. Combined with rising asset values, this desire for diversification has seen an 8 per cent growth in SMSF holdings in ETFs.
Mr Evans said this interest in international diversification among SMSF investors extends beyond individual companies to ETFs available only on foreign exchanges, a trend that is expected to continue in the second half of 2018.
SMSFs are also showing further signs of diversification with the increasing use of Listed Investment Companies (LICs) and Listed Investment Trusts (LITs) to gain exposure to new asset markets. The value of international LIC and LIT trades by SMSFs has risen from 23 per cent to 26 per cent over the past six months.
“The strength of this shift to increase offshore investment suggests it is being driven by a desire by SMSFs for greater diversification, rather than simply the relative performance of different markets,” Mr Evans said.
On the Australian scene, SMSFs know a bargain when they see one. While they have continued to focus on the Australian blue-chip stocks they know well, SMSFs have actively looked elsewhere for opportunities. Seven of the top 10 performing stocks in the ASX200 over the 12 months to 30 June 2018 are among the top 50 stocks traded by SMSFs.
Key Report Findings
- SMSFs are looking beyond the ASX20 to a more diversified group of mid- and small-cap companies with ASX20 shares now comprising 33 per cent of the total value of shares traded by SMSFs, down from 40 per cent from the same time last year
- Many SMSF investors have taken advantage of share price weakness to snap up blue-chip shares with a history of strong dividends at bargain-basement prices
- The trend to invest in ETFs with international exposure has continued to grow with internationally focused funds now comprising nearly 47 per cent of all ETF trades
- International LICs and LITs have carved out a significant niche as investors look for diversification opportunities
- Direct international share trades continue to climb with the value of direct international shares traded by SMSFs jumping by more than 57 per cent over the past year, with a growing focus on Chinese equities
To view the full report: www.commsec.com.au/smsftrends
About this report
The CommSec SMSF Trading Trends Report is an in-depth exploration of the online trading behaviour of SMSF investors, released every six months. SMSFs are a significant investor segment, representing 30% of all superannuation investments in Australia. This report is based on a detailed analysis of the trading behaviour of active CommSec clients between 1 January 2018 to 30 June 2018. The sample comprised a diverse cross-section of active share traders - defined as those who had traded at least once during the 12 months before the study period - including both SMSF and non-SMSF investors.
This report was prepared by Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec), a wholly owned, but non-guaranteed, subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 to provide general information. It is not intended to replace professional advice. As this information has been prepared without considering objectives, financial and taxation situation or needs, before acting on it consider its appropriateness to individual and client needs. Consider seeking professional advice relevant to individual needs. Neither Commonwealth Securities Limited and/or members of the CBA Group will not be liable for any loss or damage as a result of the reader relying on this information. While potential SMSF investments may have been illustrated within this content they do not represent a comprehensive suite of possible investment products and services within the guidelines pursuant to the SIS Act 1993 with ATO oversight.