SMSF contributions schedule

General Discussion / Chit Chat
1

Hi all, I am currently in stage one of my investing journey I’m aged 33. I would love some feedback and suggestions please.

Currently our SMSF is divided into three parts.
SWS ASX
SWS US
Dollar cost averaging into 3x ETF (not selling buy and hold long term due to the time I have)

I have employer and personal pre tax contributions added monthly to our SMSF.

How have people gone about adding funds into current portfolios and the positions?
I was thinking about adding the monthly funds into one of my portfolios each month. This would mean every three months funds are added into each portfolio

Thanks for sharing your experiences and thoughts.

Cheers James

2

Hi James,
Probably the reasons no one has answered, is because most of us are not qualified to give you detailed investing advice.
Having said that, generically, you need a written investment plan that accords with you, as trustee, to achieve the desired outcome for your retirement.
Everyone is different, and your accountant or investment advisor is legally able to steer you in the right direction.
At your age, you have many choices and vehicles for investment such as shares, property, bonds, fixed deposits, and many collectibles such as precious metals, art, crypto etc. Again check your options with a professional.
What you are doing seems a good start to me, and diversity will probably keep you sane over the long term.
Good luck,
Phillip.

3

Hello James

Do yourself and family a favour and just enrol in the next LTTP course with David.

Mick

4

Hi James,

I would run a set of back tests using the simulator in Beyond Charts for each of your 3 portfolio’s: for example 5yr, 10yr, 20yrs or even longer if possible (considering your age). This will give you a good idea of the returns that each of those portfolio’s could have provided and may help you decide how much of your super contributions to add to each.
I recently ran some back tests with the following results:

SPA3 Investor Simulations
ASX STOCKS
Sim ASX ETF #1 Sim ASX ETF #2 Sim #3: ASX Stocks USA STOCKS Simulation #6 USA ETF Simulation #1
Number of Positions: 3 pos 4 pos 3 pos 4 pos 9 pos 10 pos 10 pos 3 pos 4 pos
Annualised Returns:
10 Years 10.78% 9.58% 11.09% 10.30% 20.37% 20.61% 20.84% 13.03% 12.96%
5 Years 11.56% 9.63% 11.28% 10.52% 23.04% 20.68% 26.31% 16.52% 17.37%
3 Years 5.44% 4.27% 6.75% 9.04% 5.95% 12.47% 10.86% 11.72%
Portfolio Makeup: Portfolio Makeup: Portfolio Makeup: Portfolio Makeup: Portfolio Makeup:
IJH IJH SPA3 INVESTOR ASX STOCKS SPA3 INVESTOR USA STOCKS DIA DJ Ind Ave
IJR IJR EWW Mexico
IVV IVV EWZ Brazil
SFY VTS GLD Gold
SLF IJH S&P Mid-Cap
STW IJR S&P Small-Cap
VAS IVV S&P 500
VTS SLV Silver
IBB Biotechnology
QQQ Nasdaq Exposure

The other thing to consider is the equity curve of your portfolio in Beyond Charts will reflect the introduction of capital which makes it difficult to see how your portfolio performs as far as the graph looks (not such a big issue but worth being aware of).

All the best with it,

Tito

5

Thanks Phillip, thanks for the response. I should have noted in the post I wasn’t intending to ask for advice. I’m trying to work out the best option for cash injections into SWS spa3 investor. I have written out my investment plan for personal and also SMSF
I found the LTTP course helped out with this greatly.
I have had some good discussions with our accountant in regards to my skills acquisition plan.
What do you mean by diversity to stay sane over the long term? Is this due to drawdown.

Thanks for the response

Thanks Michael, I was apart of the September ASX and December USA LTTP
I was amazed how much I got out of it. In such a short time I noticed a significant shift in mindset.

Thanks Tito,

That’s a great idea. I have recently starting practicing a lot more with the simulator. Although I haven’t made ETF simulations. Thanks for sharing some of the simulations you have made. That’s a great point, as that will change my equity curve especially if different amounts of capital are invested.

Thanks for the help, unfortunately many friends my age don’t know who their super is with or account balances. (I’m often surprised by how many people are like this)

The risk vs reward for me is a greater risk doing nothing at all. Compared to taking charge and also adding additional contributions each pay cycle.

6

James,
Drawdown is a known variable that is inevitable and invokes negative thoughts to varying degrees.
Keeping sane is tempering negative thoughts to known and unknown variables that will occur during a lifetime.
The fundamental truth that “anything can happen” is a hard lesson when it is a black swan event. (not knowing what is not known) or a very low probablity event. Investing is playing the odds. With a positive edge you should win long term. However, tell that to Star Casino. Everything that works is liable to work until it doesn’t. Being diversified is a protection to risk, which may or may not be profitable in the long term, but it can be reassuring if you don’t put all or most of your eggs in the one basket.
Insurance has a negative edge to the insured and a positive edge for the insurer, but most people opt to take out some form of insurance. Why? Maybe to keep sane.
Cheers,
Phillip.

7

Hi James,

Already some wise words provided, but since I’m in a similar situation that you describe with multiple (4 in my case) portfolios, 2 in the ASX and 2 in the US, and I also have employer / personal contributions coming into my SMSF bank account each month (all in AUD).

I have a simple spreadsheet whereby on a quarterly basis I convert 60% of the total balance (just my personal preference as historically and over the long term the US outperforms the Australian market) at the day’s FX rate into USD and then inject that into my SAXO USD accounts. I take the remaining 40% and inject that into my ASX accounts. I keep a floating cash balance in the SMSF bank account to take into account things such as insurance / accountants fees etc during the year, so sometimes I might not inject ‘all’ the funds available, and other times I might inject ‘more’ from the float as I know that no costs will be incurred in the coming quarter, for example. I’ll also add in any tax refunds (or payments) to that equation also.

Essentially I want as much cash ‘in the market’ and working for me as I can, but obviously need to keep some aside as necessary.

By doing it on a quarterly basis, it’s not too often to become a monthly ‘chore’, but instead ties into my quarterly performance review of my overarching SMSF and personal investments.

Hope this helps, and great to see someone at such as young age taking such an interest in their wealth creation process. Good luck on the journey.

Best,
Graeme.

8

Hi Phillip,

That’s a great explanation. Thank you. I think this gives merit to the LTTP and also slowly adding capital rather than all at once. Thanks for your thoughts and input.

Hi Graeme,

Thank you very much for the detailed explanation. That sounds quite similar to what I’m hoping to do, as I’m cautious to not be over committing time and removing the simple and peaceful objective. Give my age and many more years of contributions I’m also wanting as much exposure to stocks as possible.

Once you add the additional funds into each portfolio, does your next position size include that into the trade? Eg a 10 fund portfolio with $10,000 starting capital and a cash injection of $1,000 would mean next position size would be $1,100?

Thanks very much,

James

9

Hi James,

Glad to be of help.

In regards to your question on the additional funds and next position size, essentially, yes, I do as you have written. As the overall portfolio ‘value’ increases by the amount injected, say $1000 in your example, then assuming I had to fill all 10 positions, then it would be as you have stated.

Often however, I might only have 2 or 3 positions that may be ‘open’ or available to fill when the additional funds are injected, so it’s then a bit trickier to be perfectly precise with your position sizing.

e.g. let’s say I had 7 positions already filled at or close to my $1000 ‘previous’ position size.
As such, using your example $10,000 account, I should have close to $7000 (based on cost) ‘in the market’ already. If I then injected my $1000 extra, then to get all my available money into the market, my position size increases to $1333.33 per position. (being then $4K / 3 positions) instead of the $1,100 per position based on the overall account value (being now $11,000). If I only purchase stocks based on $1100 each, then I’ll still have $700 cash sitting idly doing nothing in my account. It might not sound like much, but that more than 6% of the $11,000 portfolio!

The other curveball to throw in however, is that sometimes (in fact, essentially every time) you will find yourself in a position where your position sizes vary based on the growth (or declines) or individual positions already in the market. You might have a stock that’s already grown by 50% to $1500 from the original position, and others that might be say $700.

At these times, I then aim to take the philosophy of again trying to have all my money in the market working for me, and so essentially I take the open cash available (including any funds that were available prior to the injection), and divide this by the number of open positions available. What you will find is that sometimes you might start the new positions slightly ‘higher’ than 10% (assuming 10 positions in the portfolio) after the cash injection, but it won’t be materially higher, and I think outweighs having cash sitting idly about not working for you.

Beyond Charts does a good job of doing all of this automatically (so was all that a waste of time? :slight_smile:), and also factoring in a percentage of open profit, which is probably a great way to start, but just some things to keep in mind.

Hope this helps!

Best,
Graeme