Question: I have a SMSF and I am in pension phase and 70% of the portfolio is in the banks. Do you think this is a good idea?
Answer (By Paul Rickard): Notwithstanding that I am a huge fan of bank shares for tax advantaged income, my sense is that a 70% weighting to banks is too much. The ‘financials’ index in total makes up about 46.5% of the ASX. Of this, banks and insurance companies are 40%, with property trusts accounting for the balance of 6.5%. Effectively, you are almost 100% overweight.
My suggestion is that you consider de-weighting over time. Our income portfolio could be a guide if you are looking for potential sector weightings and/or stocks.
Question 2: I have an account-based SMSF, concentrating mainly on dividends. Recently there have been several articles about exposure to the US market. What ETFs could I get for the US market or would direct shares like QBE be better? I’ve also been looking at the EFT for IJP, but wondering if it has got too expensive?
Answer 2 (By Paul Rickard): Probably, the easiest way to get exposure to the US market is through Exchange Traded Funds (ETFs). There are three ETFs that track broad-based indices:
- iShares IVV, which tracks the S&P 500
- iShares ISR which tracks the Russell 2000
- Vanguard’s VTS, which tracks a US total shares index (CRPS US Total Market Index)
Less directly, you can weigh your portfolio to shares that have a major part of their revenue in US dollars and/or report in US dollars. Companies such as CSL, Brambles, Resmed, Computershare, QBE etc.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
