SMSF investors have become too dependent on dividend-paying stocks for income and should look further afield to other investments to generate those types of returns, according to an exchange-traded fund (ETF) provider.
Global X ETFs Australia head of distribution Kanish Chugh said while the demographics for ETFs had shifted, SMSF investors were still reliant on limited sources of income.
“With some of our strategies, there is a tendency to have a more millennial or gen Z investor tilt and we saw that in particular with COVID in 2020 and 2021,” Chugh said during a recent media briefing.
“There were some statistics run by the ASX in a report around ETFs saying there has been a big swathe of new investors coming into the ETF market from those younger investors.”
He noted that despite this shift, SMSF investors were looking to ETFs for income derived from dividends when many other sources were available as well.
“Australian investors get spoilt for choice with companies paying dividends, but there are other alternative income solutions that are available and we are seeing that across the whole ETF market as well,” he said.
“What we’re trying to do more of is educating the SMSF-style investors to focus on alternative offerings that have really good defensive qualities and gold is a good historical example.
“It has an inflation hedge, a geopolitical hedge and with some of the events we saw with the Ukraine crisis, gold jumped up and in dollar terms is providing positive performance over the past 12 months.
“However, Australian retail investors don’t understand the concept of how to use gold in a portfolio. They understand what gold does and it’s a shiny metal, or they know of [gold mining company] Newcrest, but they don’t understand physical gold in a portfolio allocation perspective.
“We need to do more education for clients that there is more than just the Australian equities and they have got access to global companies and different investment thematics and different asset classes, and you can actually get exposure to those now through the ETF market.”
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