Performance of the top 20 SMSF shares in FY19/20

Disclaimer: Sharesight does not provide tax or investment advice. The buying of shares can be complex and varies by individual. Seek tax and investment advice specific to your situation before acting on any information in this article.

This piece was originally published on the SMSF Connect website

Sharesight is an award-winning online portfolio tracker and performance reporting tool used by SMSF trustees to take the admin hassle out of tracking their SMSF investments.

SMSFs make up roughly 35% of the portfolios tracked in Sharesight by Australian investors. From these portfolios, we’re able to generate insights into the investment trends of trustees and the investments used to construct self-managed superannuation funds.

To help SMSF trustees compare their own portfolios to their peers, we’ve crunched the numbers on the 20 most commonly held shares within SMSF portfolios tracked in Sharesight, and how those shares have performed during the most recent financial year.

20 most held shares in SMSF portfolios

When looking at SMSF portfolios in Sharesight, possibly unsurprisingly, investors primarily hold high-yield finance shares with a history of paying dividends that include franking credits. The remainder is a mix of Australian growth stocks (such as Afterpay (ASX: APT) & Appen (ASX: APX)) and ETFs to gain broad exposure and help meet portfolio diversification goals.

Most interesting this year was the appearance of the BetaShares Australian Strong Bear ETF (ASX: BBOZ) in SMSF portfolios, an ETF that aims to provide a negative magnified return of 2-2.75x the movement in the ASX 200 accumulation index. This ETF is believed to be part of a defensive strategy by some SMSF trustees to hedge against COVID-related market risks to their portfolios in 2020.

How did these investments perform in FY19/20?

To get an understanding of how a basket of these 20 shares would have performed for SMSF trustees during the last financial year, we created a portfolio in Sharesight with an equal weighting for the 20 shares. We "purchased" a single parcel of each share (worth $10,000) on 1 Jul 2019 and used Sharesight’s Performance Report to calculate the annualised return including dividends (total annualised return) through to 30 June 2020.

Total return in FY19/20

When we run Sharesight’s Performance Report on this portfolio we see the impact of 2020’s COVID market volatility first hand, particularly through the large falls in capital value in the finance sector. However for SMSF investors primarily holding these shares for dividend income, these falls may not be an immediate concern.

These falls in capital value across the SMSF Top 20 portfolio wiped nearly 10% off its value, however this was offset by dividend income yielding 3.22%, delivering a total return for the portfolio of -6.36% during the financial year.

Among the top performers were Zip Co Limited (ASX: Z1P), returning nearly 69% and CSL Limited (ASX: CSL), returning over 33% over the period. At the other end of the spectrum, online travel firm Webjet Limited (ASX: WEB) was hammered by the impacts of COVID on the outlook for travel, down 73% during the financial year.

Dividend returns

If we run the same performance report and sort holdings by dividend return, we can examine the drivers of income for SMSF portfolios.

SMSF trustees that invest for dividend income saw dividend yield above 5% from 6 of the 20 shares in the portfolio in FY19/20, led by Commonwealth Bank (ASX: CBA) and BHP Group (ASX: BHP).

Franking credits highly desired by SMSF investors

Sharesight’s Taxable Income Report allows us to look at all the dividends paid during the year by shares in the portfolio, as well as highlight the strong preference of SMSF investors for Australian shares that pay fully franked dividends.

Of the shares in the SMSF Top 20 that paid dividends during the financial year, all except CSL (ASX: CSL) and Vanguard’s international shares ETF, (ASX: VGS) were either partially or fully franked, highlighting the importance of franking credits as a consideration of trustees seeking the best returns from their SMSF within Australia’s tax regime.

SMSF Top 20 portfolio diversity

By looking at the portfolio diversification, and grouping shares in the portfolio by industry classification, we see that finance and banking shares make up a significant percentage of the portfolio which could present concentration risks if this was a real SMSF portfolio.

Stay on top of your SMSF portfolio with Sharesight

The end of the financial year presents a perfect opportunity to examine your SMSF performance with your financial planner or accountant, explore the portfolio’s asset allocation and rebalance holdings in accordance with the documented investment strategy for the SMSF.

Sharesight is built for the needs of SMSF trustees and helps make this easy. With Sharesight you can:

• Organise holdings according to the documented SMSF asset allocation and investment strategy, providing valuable insights throughout the year

• Easily share SMSF portfolios with accountants or financial professionals to make admin and tax compliance a breeze

• Track SMSF investment performance with prices, dividends and currency fluctuations updated automatically

• Run powerful tax reports built for Australian investors, including capital gains tax, unrealised capital gains, and taxable income (dividend income)

Sign up for a FREE Sharesight account and get started tracking your SMSF investments today.

FURTHER READING

• 7 reasons why Sharesight is better than a spreadsheet
• Record-keeping requirements for Australian investors
• 5 ways to get the portfolio insights you need