The Monash Centre for Financial Studies has released a study on the performance of SMSF investors’ direct Australian equity allocations. They found that the average SMSF in the (extensive) SelfWeath database took more risk and had lower returns.
Our research revealed that SMSFs’ Australian equities portfolios had low levels of diversification and liquidity and many did not beat the market.Cui, Pham and Rubath 2021, Is there wisdom within the crowd?
The return gap was about 3% over long periods, which is a similar return gap to those found in other studies overseas.
They also found style bias in SMSF holdings, with SMSFs overweight small stocks, low volatility stocks and high dividend yield stocks, and underweight quality, value and momentum.
This is another study that shows that although its hard to outperform the market, it’s easy to underperform it without a well thought out investment strategy. That may sound glib, but if markets were truly efficient a random portfolio ought to perform as well as any other on average. These results suggest the opposite is true.
You can access the full paper here.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.