Name: Stephen Hogg
Age: Mid thirties
SMSF members: My wife and myself
How long have you had your SMSF?
Three years
Why did you start it up?
We started it up mainly for insurance purposes and also our superannuation balances combined had reached critical mass to warrant an SMSF.
With insurance we wanted to lock in the pricing – for life and TPD (total and permanent disability) – so it would be easier to keep premiums lower in the future and to have the security of an adequate amount of insurance cover.
How big is it?
Less than $500,000
Is it more or less difficult to manage than you thought it would be?
Because I’m in the industry, it’s pretty much as I imagined it. The big unknown factor is how much time you want to spend on investment strategy. I guess there is a lot of sporadic enthusiasm on my part, but I haven’t seen the pay off in being more or less passive or active at this stage.
Are you glad you have it?
Yes it helps me understand some of the issues that my clients with SMSFs might be going through and also I was really happy to lock in the insurance.
Are you pleased with its performance?
Yes in terms of keeping costs downs, we’ve definitely saved on fees. I think lower fees, in and of themselves, can obviously improve performance.
In terms of overall performance we’ve done pretty well. I believed we could beat the index and we’ve done that.
What is your asset allocation?
We probably have around less than 5% in cash, 30 to 40% in international equities and the rest in domestic equities.
I don’t invest directly in international – I don’t think it’s warranted unless you’ve got serious money to mitigate currency fluctuations – we invest through managed funds like Magellan and Vanguard. I looked for good managers with low Management Expense Ratios. We don’t have any property. I think that most Australians are probably overexposed to property through the mortgages on their family homes.
The Australian stock component is mostly in the S&P/ASX 20. It’s a fairly conservative strategy. I don’t invest in any speculative stocks. Investing in Australian dividend payers – like the banks and Telstra – is still a very tax-effective strategy for SMSFs paying 15% tax in accumulation and 0% in retirement phase.
What are your favourite investments/stocks and why?
One of my least favourite investments was ABC Learning, but that was before I established the SMSF. One of my favourite investments has been CSL. Of course it’s all relative to when you invested but we’ve had that in our SMSF since the beginning.
Do you use an advisor or any kind of service provider?
No, just the BGL software.
Is there anything else you’d like to say about SMSFs?
I think one of the major benefits often overlooked with establishing SMSFs is the insurance. The earlier you do this, the easier it will be to get better rates during major life events.
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