Issue 43: Long-term investing and how an SMSF is suited to delivering it

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Issue 43: Long-term investing and how an SMSF is suited to delivering it

There has been much discussion of late regarding the shift from ‘growth’ to ‘value’ investing, perhaps prompting the question with some SMSF trustees, ‘do we need to adjust our investment portfolio along similar lines?’

My understanding of growth investing is that it’s where investors seek to grow their investments over time, often in a combination of capital growth and income. However, this combination is not always the case as some strong growth investments in the past have all been about capital growth; share price appreciation, without income – think buy now pay later (BNPL) investments.

Value investing, as the name suggests is about finding ‘value in the market’, sometimes from unloved or out of fashion investments however, with good underlying prospects. These can quite often be about delivering income, rather than growth through share price appreciation. However, an investor can use a value stock to achieve growth in their portfolio by reinvesting income received if not required now. In this way, they may be able to achieve portfolio growth over the long-term; building a solid base from which to convert to income when needed, simply by no longer reinvesting and taking the income to live from.

As superannuation is a long-term investment, it is appropriate that it be viewed as such and any decisions to adjust investment portfolios, are taken after due consideration and not in response to the noise in the market place.

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Disclaimer: The information contained in this document is provided for educational purposes only, is general in nature and is prepared without taking into account particular objective, financial circumstances, legal and tax issues and needs. The information provided in this article is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should assess its relevance to your individual circumstances. While SMSF Association believes that the information provided in this article is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the Corporations Act 2001.

Ian Irvine - Guest Contributor

Ian has been a keen investor for over 40 years and can draw on his experiences from both investing on his own behalf and also having worked in financial services for more than 30 years. Over this time, he has seen many changes that impact investors’ attitudes to in what and how they invest.

He started his career in what is now referred to as fast moving consumer goods (FMCG) or grocery, working for an Australian margarine manufacturer. In 1986, he was recruited to Westpac around the time of deregulation of the sector, where he spent 10 years before taking a role at AMP and then with ASX for 14 years up to the end of 2017. He continues to be involved with ASX; working on their educational programs.

In 1996, he and his wife established their own SMSF and again the experience and lessons learned regarding managing an SMSF over the years have provided him with many insights and ideas. He enjoys sharing these with others where these are helpful and always suggest that if an investor or SMSF trustee is unsure, that they should seek appropriate advice from a licenced professional.

Ian holds a B. Com (UNSW), and lives in Sydney and enjoys travelling to and meeting investors and SMSF trustee at the educational events with which he has involvement with from time to time.