The report shows that since 2015, SMSFs have continued to become more defensive. Among the SMSFs who made substantial changes to their asset allocation in 2019, an estimated 104,000 SMSFs made changes to make their portfolio more defensive, while only 39,000 changed their allocation to more aggressive assets.

The allocation to cash by SMSFs increased slightly over the past year from 23 per cent to 25 per cent, largely at the expense of unlisted managed funds which dropped from 11 per cent of assets down to 9 per cent.

Vanguard Australia head of market strategy Robin Bowerman said the outlook for market returns of SMSF investors is very low at 1.4 per cent, far below the expectations of many economists.

Despite this, SMSF trustees remain most inclined to invest further in blue-chip shares, with 54 per cent citing this as a likely investment choice over the next 12 months.

While many SMSFs have adopted a defensive mindset, their appetite for diversifying investment products has increased, with SMSFs also seeking greater exposure to overseas assets.

However, 52 per cent of respondents cited lack of knowledge about overseas markets and currency risk as the top barriers to obtaining more exposure. 

Mr Bowerman said while building a sustainable income stream remains a key investment goal for many SMSFs, a growing proportion say protecting their assets against market falls will be their key focus for the year ahead.