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SMSF Investment Trends 2023 – My SMSF

Summary

SMSF Investment Trends in 2023,what to invest in a SMSF, SMSF investments across the market.

SMSF Investment Trends 2023
In the world of Self-Managed Super Funds (SMSFs), investment trends and strategies are continually evolving. SMSF trustees are increasingly looking beyond traditional asset classes to diversify their portfolios and potentially enhance returns. This article explores four such avenues: property, cryptocurrency (with a focus on Bitcoin), gold bullion, and pink diamonds, analysing their recent performance and inherent risks.
1. Property in SMSF
Returns: Investing in property through an SMSF has long been a popular choice. The returns from property investments can be significant, particularly in booming real estate markets. They offer both rental income and potential capital gains. Historically, Australian residential property has provided an average annual return of around 6-8%.
Risks: The risks associated with property investment include market volatility, liquidity concerns (i.e., the ease of buying and selling), and regulatory changes affecting SMSF property investments. Additionally, high entry costs and ongoing maintenance expenses can impact overall returns.
2. Cryptocurrency and Bitcoin
Returns: The allure of cryptocurrencies, especially Bitcoin, lies in their potential for high returns. Bitcoin, for example, has experienced periods of rapid appreciation, attracting SMSF investors drawn to its performance and the diversification it offers compared to traditional assets.
Risks: However, the cryptocurrency market is highly volatile and unpredictable. Regulatory uncertainties and cybersecurity risks (like hacking) add to the investment’s complexity. The lack of a long-term track record makes it a speculative investment, albeit with potential high rewards.
3. Gold Bullion
Returns: Gold is often considered a ‘safe haven’ investment. In times of economic uncertainty, gold typically maintains its value or even appreciates. Over the long term, gold has provided modest but stable returns, acting as a hedge against inflation and currency fluctuations.
Risks: The price of gold, while less volatile than assets like cryptocurrency, can still be influenced by various external factors, including geopolitical events and changes in the US dollar’s strength. It does not generate income like dividends or rent, which can be a downside for some investors.
4. Pink Diamonds
Returns: Pink diamonds are a unique and rare asset class. Their value has steadily increased over the years, driven by their scarcity and demand in the luxury market. They are considered a tangible investment, much like art or antiques.
Risks: The main risk lies in the liquidity and valuation of pink diamonds. The market for these diamonds is niche, and selling them may take time and expertise to ensure a fair price. The valuation process is also more subjective compared to traditional investments, making price predictions challenging.
Investment Asset Average Returns (3-5 Years) Costs and Fees
Property 6-8% annually High entry costs, stamp duty, legal fees, ongoing maintenance, property management fees, potential land tax

Investment Asset

Average Returns (3-5 Years)

Costs and Fees

Property

6-8% annually

High entry costs, stamp duty, legal fees, ongoing maintenance, property management fees, potential land tax

Bitcoin

63.57% annually*

Trading fees, wallet or exchange fees, potential capital gains tax. *Forbes annual returns for Bitcoin

Gold Bullion

2-5% annually

Storage and insurance costs, dealer markups and spreads, potential capital gains tax

Pink Diamonds

10-15% annually

Insurance and storage, appraisal fees, potential resale costs (brokerage or auction fees)

Conclusion
Diversification remains a key strategy for SMSFs, but it’s crucial to balance potential returns with the risks involved. SMSF members, should consider their fund’s investment strategy and seek professional advice before diving into these alternative asset classes. By diversifying SMSF portfolios to include some of these assets, SMSFs can include exposures to these assets subject to advice and risk appetites, to optimize your SMSF retirement savings.

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