SMSF investors prove they can beat the pros at their own game

According to the Australian Tax Office (ATO) there are currently around 528,000 self-managed super funds (SMSF) which collectively have approximately one million members and control over half-a-trillion dollars in assets – that’s a massive one-third of the total superannuation pie!

It’s no wonder firms such as IOOF Holdings Limited (ASX: IFL) and AMP Limited (ASX: AMP) have skewed their businesses towards the SMSF trend via their wide financial planning base in the hope of capturing this growing market.

It’s also no wonder that investors who are serious about securing themselves a comfortable retirement are turning to SMSFs as their vehicle of choice judging by the latest research provided by National Australia Bank Ltd. (ASX: NAB).

According to a recent study commissioned by the NAB, SMSFs outperformed the wider superannuation funds industry over the seven years to 2012; while the average return after fees from an APRA-regulated fund was 4.1% per annum (pa), SMSFs blitzed this with a 6.8% pa return.

The results from the study absolutely smash the perception that individual investors managing their own super – often aided by some form of investment advice – are at a disadvantage and ultimately underperforming the institutional investors.

Within the SMSF segment, there are of course many different strategies. Some SMSF trustees will effectively outsource the day-to-day management of their investment decisions by investing in funds, such as those run by Platinum Asset Management Limited (ASX: PTM), or to a listed investment company such as Argo Investments Limited (ASX: ARG).

Other SMSF investors will be much more pro-active in running their fund, making most of the investment decisions themselves, with or perhaps without advice from a broker, financial planner or investment service like The Motley Fool.

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Meanwhile the structure of the portfolio will also most likely be based on whether the SMSF investor has already retired and is in the ‘draw down’ phase. Under this scenario it’s likely they will have weighted their portfolio towards high yielding, blue chip, fully franked dividend stocks. If they are still many years from retirement and in the ‘accumulation’ phase then chances are their portfolios will be more weighted towards smaller, growth stocks.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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