Asset allocation and property investing

HeidiArmstrong 70x60One of the biggest advantages of managing your own superannuation fund is that you are the decision maker.

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Blogger: Heidi Armstrong, CEO, State Custodians

The biggest challenge is to ensure that you make the right decisions!  After all, these decisions will determine the value of your retirement savings.

Many investors have a desire to invest in direct property, but advisers say that investments need to be well diversified.  How can you achieve diversification in your portfolio if your fund has barely enough assets for the desired property investment alone?

Asset Allocation is a strategic plan to give your superannuation fund diversification across different asset classes and investments.  It is designed to protect your portfolio from falling markets and to maximise your returns by ensuring you have exposure to performing markets.  There are four main types of asset classes, each categorised as being defensive or growth.  Defensive assets typically include cash and fixed interest and growth assets include shares and property.


Asset Allocation and therefore diversification in your portfolio is seen by many as the cornerstone of a successful investment strategy.  It could have a greater impact on your fund’s returns than the individual investments chosen.

The tangibility of investing in property is what makes this type of asset so attractive to many.  The problem with direct property investment is its high cost.  You have the potential of having all of your funds worth tied up in a single property which means that the future of your retirement savings is highly reliant on the success of that one property. Upon retirement it will also impact the ability of the fund to pay pensions if it is holding one “lumpy asset”.

So how do you achieve both investing in real property and the ability of your fund to achieve diversification with its investments?  An investment loan taken out by your SMSF may be one option.  The investment loan enables you to contribute less of your funds cash into the property purchase, leaving more funds to invest other asset classes.

There is no magic formula in achieving the right asset allocation.  It will be different for each SMSF and will depend on your goals, how much risk you can tolerate and your investment horizon.  Your asset allocation may change over time as your lifestyle and experience changes and should be reviewed annually.

About Heidi Armstrong
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Heidi Armstrong is the CEO for State Custodians Mortgage Company. Since founding the Company in 2006, State Custodians has grown to become one of Australia’s most respected non-bank lenders. Heidi holds a Law Degree, a Bachelor of Science and a Diploma of Finance and Mortgage Broking Management. An expert in personal finance, securitised lending and the mortgage industry, Heidi is passionate about sharing her invaluable knowledge to educate borrowers.

Widely recognised and respected by industry peers, Heidi was a finalist in the 2012 Australian Lending Awards for the Best Thought Leader. Moreover her Company, State Custodians, has received numerous awards, including Money Magazine’s 2013 Non-Bank Lender of the Year, a ‘5 Star’ CANSTAR rating on four of its main loans for six years running and the prestigious award for Best Overall Customer Service at the 2013 Australian Home Loan Awards (beating all of the major banks, credit unions and other lenders and mortgage providers for superior customer service).

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