The report was based on a survey almost 4,000 SMSF trustees and 501 financial advisers, and also found that 22 per cent of SMSFs have half of their equity portfolio in financial stocks alone.

Mr Peker said SMSFs holding fewer stocks typically have a much higher concentration risk in their portfolios.

“Even among those holding more than 20 stocks, 20 per cent say over half of their share portfolio is invested in financial and/or resource stocks,” the report said.

“When you think about how banks have done over the past six months or how resource stocks have done in the past year, you have to wonder, were their portfolios sufficiently diversified to mitigate the performance of those stocks in their portfolios,” Mr Peker said.

SMSF trustees, he said, are beginning to recognise they need to increase the diversification of their portfolios and are increasingly looking at managed funds as a way to do this.

“One key growth area recently has been exchange-traded funds,” Mr Peker said.

“What we find now is that 82,000 SMSFs hold ETFs within their portfolio: that’s an increase of 55 per cent from the previous year.”

There were 53,000 SMSFs using ETFs within their portfolio in 2014, Mr Peker said.

Vanguard head of market strategy and communications Robin Bowerman said the large portion of assets SMSFs continue to hold in direct shares, and the increasing levels of excess cash, present a range of issues for SMSF portfolios.

“They may be building in more concentration risk at a time when trustees are increasingly concerned about financial markets,” Mr Bowerman said.

“However, it is positive to see investors, both advised and unadvised, increasing their diversification through vehicles like managed funds and ETFs .”