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Bad news for SMSFs with cash-heavy portfolios
One investment manager has predicted that interest rates will remain where they are until 2020 and warned SMSF investors against holding excessive amounts of cash.
Wealth Within chief analyst Dale Gillham said interest rates have now been on hold at 1.5 per cent for 26 consecutive months, which is the longest period in history without an adjustment.
A weaker Australian dollar means that a rate hike might not occur till 2020, he said.
“Further, as property prices fall, there is no pressure on the RBA to use monetary policy as a control measure,” he said.
With a 30-day deposit only generating a return of around 2 to 2.5 per cent, SMSFs should be careful of holding too much of their portfolio in cash, he warned.
“As inflation is currently at around 2 per cent, this means your cash return is likely to be zero,” he explained.
Mr Gillham said that, for a number of years, many investors have listened to fear mongers about a market crash, which has seen them shy away from growth stocks.
“The share market will continue to rise and investors will move more cash out of term deposits into stocks,” he said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
How many times have I heard this one from a Fund Manager. Perhaps the size of the cash in SMSFs relates to the more than $200Bn held by over 60 year old members in pension. They remember the GFC too well. Perhaps Wealth Within could develop a product with a capital protected equities product.0
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