Issue 5: Understanding the measures of performance in your SMSF

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Issue 5: Understanding the measures of performance in your SMSF

November 2019

For those who have been following our series to date, I hope the articles have been helpful in building some fundamental understanding of how to set up, run and manage an SMSF portfolio from an investing perspective.

In this instalment, I thought it may be helpful to continue in this vein and discuss some of the terms used to describe performance; yield, total returns, grossed-up for franking and see how and where these apply to an SMSF investment portfolio.

It is important to look at investment returns across a whole SMSF investment portfolio. Holding a range of investments, with differing returns at different levels of risks is part and parcel of a well-diversified SMSF. As there is generally a trade-off between higher returns and risk, maybe we should look at different measures of performance for the differing elements of SMSF portfolios.

So, what are some commonly used measures and where could they be used?

Let’s start with yield.

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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.