Question 1: We’re interested in the iShares IVV ETF for our SMSF to increase our diversification and enter the US Market (for the first time). Currently, we only have Australian shares, TDs and cash accounts. Are there any onerous Australian or US tax implications if we invest in this S&P 500 ETF?
Answer: Nothing too onerous. There will be some withholding tax deducted, but because Australia has a double tax treaty with the USA, you will get a foreign tax credit. This will all be shown on the annual tax statement you receive each year.
One other consideration. There is also a currency hedged version of IVV. A fraction more expensive and not as liquid, but worth considering when the Aussie dollar is getting below what many might consider its long term value. Trades under the code IHVV.
Question 2: When the market bounces back, what are the best stocks to buy?
Answer: Stick with the big caps, and companies with great growth prospects such as Xero, Resmed and some of the other tech leaders. I would focus on the stocks mentioned in our article the other day: https://switzersuperreport.com.au/stocks-for-the-next-10-years-what-the-experts-say/.
Just as important as knowing what to buy is knowing what to avoid. I shared my thoughts here: https://switzer.com.au/the-experts/paul-rickard/stocks-to-avoid-when-the-recovery-comes/
Question 3: I hold quite a bit of cash in my SMSF portfolio. Is it advisable to buy gold shares instead of holding cash?
Answer: I don’t see buying gold as a substitute to cash. I am not in the “doomsayer” school who hold gold as a last resort asset. But I can see a case for holding gold as a defensive asset in lieu of more risky assets. Importantly, there a number of ways to get exposure to gold. Buying gold shares is the riskiest and potentially the most rewarding because the companies are very leveraged to the gold price. A less risky way to hold gold is directly (you can hold the actual bullion with the Perth Mint), or indirectly (and the way I prefer) by investing in an exchange traded fund that holds gold bullion. GOLD (this is the ASX code) from ETF Securities is the best example.
Question 4: I don’t have any room under my cap of $1.6m to create a further pension phase, even though the total of my current balance in my super fund (including the Accumulation Account) is now well below the $1.6m. Is there any likelihood that in the foreseeable future the government may increase this?
Answer: Unfortunately, I don’t think any increase is on the agenda. It is a lifetime limit, so if you have used it all up, there isn’t anywhere to go. It is indexed to inflation, but it looks like the first increase to $1.7m won’t happen in 20/21 – the date is to be advised.
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 regard to your circumstances.
