May 3, 2017

A vital SMSF question: A corporate trustee or individual trustees?

A self-managed super statistic that doesn’t seem to change much over the years is the strong preference of new Self Managed Super Funds for individual trustees rather than a corporate trustee. The latest-available tax office statistics on SMSF trustee arrangements show that 93 per cent of SMSFs established in 2015-16 had individual trustees – a percentage that has remained more or less static in recent years. Yet 77 per cent of all SMSFs in existence at June 2016 had individual trustees – again a percentage that has remained rather static. Looking at this from another way, a third of all […]
May 3, 2017

Avoid ‘piecemeal’ portfolio creation

How did you create your investment portfolio? Was it a carefully thought out, highly planned and disciplined process? Or was it a “piecemeal” approach? As analysts wrote in the paper, Vanguard’s framework for constructing globally diversified portfolios: “Without a plan, investors often build their portfolios from the bottom up, focussing on investments piecemeal rather than on how the portfolio as a whole is serving the objective.” Another way to characterise the piecemeal approach, the analysts add, is fund-collecting. “These investors evaluate a particular fund [or an individual asset] and, if it seems attractive, they buy it – often without thinking […]
April 26, 2017

Practical ways to control portfolio drift

Sticking to a disciplined strategy of regularly rebalancing a portfolio back to its target asset allocation can often seem counter-intuitive. This includes in the prevailing low-interest investment environment with expectations for lower returns over the medium-to-long term for broadly-diversified portfolios. In short, portfolio rebalancing can be an emotional decision for investors, requiring the selling of currently outperforming assets to buy currently underperforming assets. The basic reasoning behind periodically rebalancing is to recapture a portfolio’s intended risk-and-return characteristics. We have recently discussed how a broadly-diversified portfolio’s asset allocation is the primary driver of its return variability over time and how a portfolio […]