What are the benefits of using ETFs for an SMSF in the accumulation phase?

There are a number of potential benefits to holding ETFs within an SMSF.

For instance, an SMSF in the accumulation phase tends to have a higher allocation towards growth assets – in particular, Australian and international shares. Having exposure to global shares can help you invest in a wider range of industries and sectors than is possible by just investing in Australian shares alone. Several global sectors with the potential for growth – like technology, healthcare, robotics and cybersecurity – have tended to be under-represented on the ASX.

ETFs can help – they offer convenient exposure to growth assets, both domestic and international. In a single trade, an SMSF can gain exposure to a broad-based portfolio of Australian or international shares. Broad-based exposures can also be complemented by allocations to specific sectors or themes like cybersecurity, cloud computing or solar energy.

What are some options for an SMSF in the accumulation phase to invest in?

For the growth component of an SMSF portfolio, the types of funds that could be considered include:

What might a diversified portfolio look like for an SMSF in the accumulation phase?

There are no hard and fast rules about the proportion of growth versus defensive assets an SMSF should allocate to. The investment allocation should be considered in light of your SMSF’s investment strategy, which takes into account the individual circumstances of members and the assets available for an SMSF to meet that strategy.

As you grow older, and approach retirement, you may look to increase the proportion of assets your SMSF holds in defensive assets, and decrease the proportion held in growth assets. At the same time, when a new member joins your SMSF, you may also want to change the proportion of assets to account for the investment objectives of this individual.

As always, personal circumstances vary and may have an impact on your financial objectives and risk tolerance over time. For these reasons, you should consider obtaining professional financial advice.

Note that superannuation law requires SMSF trustees to have a written investment strategy, which must be implemented and regularly reviewed. This policy and its implementation are audited annually.

Do I need to rebalance? Or can I ‘set and forget’?

You are required to review your SMSF investment strategy regularly.

To ensure your SMSF holdings remain within your target asset allocation for your investment strategy, it’s important to monitor and rebalance your portfolio from time to time. For example, if shares have had an especially strong year, they may now represent a higher proportion of your portfolio than you would like. You might consider reducing your exposure to shares back in line with your SMSF investment strategy.

If your shares exposure is in the form of a few ETFs or other exchange-traded products, this adjustment is easy to make – requiring only a small number of transactions. Compare this with holding multiple individual shares directly, which could require many transactions if each holding is to be reduced proportionally.

Alternatively, our ETF model portfolios – accessible through financial advisers and available on various platforms – are rebalanced on a regular basis in accordance with different risk profiles and investment objectives.