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We are retired and have an SMSF worth about $1 million. We have 80% in shares and 20% in income securities. We have a total of nine holdings, including banks, Telstra, BHP, Woodside etc. and are both 70.
We recently sold NAB and Wesfarmers and bought BOQ and more Telstra. We have a stockbroker for these trades and it was on his suggestion that we sold. What is your view on the number of holdings and percentage of shares versus cash?
A: The ‘number of holdings’ question is a little easier. There are lots of studies on this. Basically, they show a minimum of eight, with benefits still up to around 15 to 20 individual holdings. Personally, I prefer more rather than less – so I would be more inclined to be in the high teens. Over 25 holdings, it gets too hard to manage and keep track of the individual companies.
Allocation between growth assets (like shares) and income assets – this depends on your investment objectives, timeframe and risk appetite. Prima facie, an allocation for two retirees aged 70, split 80% growth and 20% income looks to be on the high side. I can’t say that this is incorrect for you – I can just offer a generalised comment.
