Here’s why your SMSF is probably going backwards

The Business Insider website is reporting research from the Super Ratings research website that shows superannuation funds are still suffering in the face of weak equity markets.

According to Super Ratings, February was the fifth month this financial year that delivered negative returns for super investors who had holdings in “median balanced” option super funds. The median balanced option is generally the default option according to Super Ratings, with approximately 60% to 70% of Australians invested in a fund’s default option.

According to Super Ratings the average median balanced option was down 0.5% in February, with the financial-year-to-date return being down 1.6%.

One big problem with investing in blue-chip-oriented retail funds is the limited investment universe of the ASX, which is dominated by the big 4 banks, supermarkets and iron ore majors.

Furthermore, inviolable investment guidelines mean large ASX-focused retail funds normally have little alternative but to have exposure to large-cap ASX businesses that may be sailing into headwinds.

Consequently, having too much indirect exposure to the likes of Australia and New Zealand Banking Group (ASX: ANZ) or BHP Billiton Limited (ASX: BHP) over this financial year has been detrimental to your investing returns.

Luckily, SMSF investors have the freedom to invest in many different asset classes or individual stocks without having to pay the management fees charged by professional fund managers who often fail to deliver value for money.

If I was approaching retirement and my SMSF was going backwards, I’d take the time to discover some individual stocks that offer a good mix of income and growth. Moreover, I would not be gifting 1.5% a year of my total balance (plus performance fees) to a fee-charging fund manager delivering dud returns.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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