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The importance of asset allocation tracking for SMSFs

by Stephanie Stefanovic, Content Writer, Sharesight
This article is for informational purposes only and does not constitute a product recommendation, taxation or financial advice and should not be relied upon as such. Please check with your advisor or accountant before using Sharesight or any other tool for your SMSF, to ensure you meet the ATO’s compliance obligations

Tracking your asset allocation is a crucial part of maintaining a self-managed super fund – and one that is all too often put off by trustees. The ATO requires self-managed super funds (SMSFs) to document their asset allocation and how this aligns with their investment strategy, reviewing this at least once per year. Ideally however, the ATO recommends that SMSF trustees review their strategy and asset allocation on a more frequent basis, especially in times when there is a market correction, a new member joins or departs the fund, or a member starts receiving a pension.

While this can seem like a time-consuming process, there are tools available that take the time and effort out of manually tracking your asset allocation and investment strategy. This article will discuss recent data on how SMSFs are allocating their assets, and how trustees can use Sharesight’s portfolio tracker to automatically track their assets and get information at a glance about the return on their investments. To learn more, keep reading.

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How SMSFs allocated their assets in 2020

The year of 2020 saw a major market correction, causing some SMSF trustees to rethink their asset allocation and investment strategy. Diversification remained an important investment strategy, however, and is recommended by the ATO to avoid concentration risk no matter what the market conditions are.

Based on data from investors using Sharesight to track their SMSF, more than 80% of SMSF assets were concentrated in individual stocks, while the rest were primarily concentrated in ETFs and trusts. The majority of these assets were in the ASX, with only 15% in international markets.

Sharesight data also shows that the domestic stocks held by SMSFs in 2020 were largely companies known for sizeable dividends and good long-term performance. Meanwhile, the top international stocks were primarily tech-based companies concentrated on the Nasdaq.

SMSFs continued to prioritise diversity in their asset allocation, with a leaning towards blue-chip companies that had proven returns over the economic cycle and were expected to be able to weather challenging market conditions.

How Sharesight helps investors track their assets

Tracking the asset allocation in your SMSF is an important part of ensuring you are adhering to your elected investment strategy. Sharesight’s portfolio tracker simplifies asset tracking for SMSF trustees by allowing investors to see all of their holdings in one place and track their asset allocation and investment strategy throughout the year with a range of powerful reports.

Sharesight’s Diversity Report, for example, gives investors a detailed breakdown of the asset allocation in their investment portfolio, including the ability to create Custom Groups. Custom Groups is a key feature for SMSF trustees when used with the Diversity Report, as it allows you to assess how your portfolio is tracking against self defined asset allocation categories at a given point in time.

For example, if you have an asset allocation target that dedicates 50% to domestic stocks, 20% to international stocks, 15% to property and 5% each to alternative investments, cash and domestic bonds, you may find it useful to group your investments under custom tags like below:

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Having established the custom groups of your choice, you can then run the Diversity Report to see how you are tracking against your asset allocation target. This will give you the information you need to adjust your assets, selling off any assets that are over-exposed or investing in assets that are under-represented in your portfolio.

As you can see in the screenshot of the Diversity Report, compared to the target weightings above, this portfolio is tracking significantly underweight in domestic stocks (19.88% vs a target of 50%) and is overweight in domestic bonds (15% vs a target of 5%).

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You can also dive deeper into the performance of your SMSF asset allocation strategy using Sharesight’s Contribution Analysis Report, which shows you the contribution of each asset class to the overall performance of your portfolio, as seen in the example below. This is evaluated in terms of capital gains, dividends and currency gains, all of which are automatically tracked in your Sharesight portfolio.

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Importantly, Sharesight makes it easy to track all of your holdings in one place. Not only can users track all of their SMSF holdings in one portfolio, but the Consolidated View feature also allows you to track the performance of your investments across all of your portfolios at once. Displayed in the screenshot below, this is a useful feature if you have investments outside of your SMSF.

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Track your SMSF asset allocation with Sharesight

Join over 250,000 investors tracking their investments with Sharesight.

Built for the needs of SMSF trustees, with Sharesight you can:

  • Organise holdings according to your 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.

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FURTHER READING