SMSF investment: 20 most popular Australian shares

This article includes the 20 most popular Australian domestic listed securities invested in by SMSFs as at 30 September 2018. This article uses data supplied by Class, an SMSF administration software company, and is based on a statistical analysis of the 160,000+ SMSFs administered using Class software. We thank Class for giving SuperGuide access to such valuable data.

See also:

• SMSF investment: 20 most popular international shares
• SMSF investment: 20 most popular managed funds
• SMSF investment: 20 most popular ETFs

They’re some of the biggest companies in Australia, offering a degree of safety along with the potential for capital gain and dividend income, so it’s no surprise that SMSFs are heavily invested in the largest 20 ASX listed shares.

These are household names Australians have grown up with – think the big four banks, BHP Billiton, Telstra, Woolworths and the like – and they offer investors an opportunity to buy shares directly in companies they believe will deliver long term returns.

Buying shares directly also allows individual investors to craft their own diversified portfolio across a range of industries according to their own needs for long-term growth, a sustainable income stream from dividends and the tax advantages of dividend franking credits.

Australian shares are the most popular investments among SMSFs, making up the lion’s share (76.8%) of the broader asset class of domestic listed securities. ETFs (8.4%) have overtaken debt and hybrid securities (7.8%) in second spot with stapled securities in fourth place (5.8%).

Taken as a whole, domestic listed securities make up 34.7% of SMSF assets with 67% of funds holding this asset class.

Of course, picking shares and monitoring them takes time and effort but it does have potential to grow wealth in the long run. And because all earnings on investments in your super fund must be preserved until you retire or reach another condition of release, capital gains and dividend income must be reinvested within your fund where they compound over time.

According to Class data, as at 31 March 2019 direct investment by SMSFs in domestic listed securities is heavily concentrated in blue chip stocks which tend to mirror the ASX top 20 listed companies.  

The top 20 list below is ranked by the percentage of SMSFs that hold these shares, rather than the value of assets that all SMSFs have invested in those shares, although both figures are provided in the table.

Rank	Security Code	Description	% of Funds with Domestic Listed Securities that hold this security	% of total SMSF Domestic Listed Securities Investments*
1	WBC	Westpac Banking Corporation	48.6%	5.0%
2	BHP	BHP Group Limited	46.4%	5.4%
3	TLS	Telstra Corporation Limited.	46.2%	2.9%
4	NAB	National Australia Bank Limited	45.0%	4.4%
5	CBA	Commonwealth Bank Of Australia.	45.0%	6.2%
6	ANZ	Australia And New Zealand Banking Group Limited	43.6%	4.2%
7	WES	Wesfarmers Limited	34.4%	2.1%
8	WPL	Woodside Petroleum Limited	29.8%	1.8%
9	WOW	Woolworths Group Limited	26.4%	1.7%
10	CSL	CSL Limited	22.3%	3.7%
11	RIO	Rio Tinto Limited	19.4%	1.8%
12	MQG	Macquarie Group Limited	18.0%	2.1%
13	S32	South32 Limited	17.9%	0.4%
14	TCL	Transurban Group – Ordinary Shares/Units Fully Paid Triple Stapled	17.5%	1.4%
15	SYD	Sydney Airport – Fully Paid Stapled Securities	13.9%	0.8%
16	QBE	QBE Insurance Group Limited	13.3%	0.6%
17	CYB	Cybg PLC – Cdi 1:1 Foreign Exempt Lse	13.3%	0.1%
18	RHC	Ramsay Health Care Limited	12.9%	0.7%
19	AGL	AGL Energy Limited	11.7%	0.8%
20	ORG	Origin Energy Limited	11.6%	0.5%

Source: Class (class.com.au). Data as at 30 March 2010

As you can see, direct investment by SMSFs is concentrated in the banks which make up 42% of the top 20 holdings. The big 4 banks take out 4 of the top 6 spots, with Macqarie Group also remaining in the top 20.

After taking a hit during the Banking Royal Commission, the banks clawed back some ground perhaps because they avoided the harsh penalties many investors expected. There was a slight increase in the percentage of SMSFs holding the big 4 plus Macquarie although the total value of bank holdings fell slightly.

Chart: S&P/ASX 200 Financial-X-A-REIT (1 year to 4 June 2019)

Source: marketindex.com.au

The biggest casualty of the Royal Commission was AMP, which fell out of the top 20 entirely. It was replaced by the only new entrant AGL Energy.

AGL’s share price surged in the early months of 2019 after a 10% lift in December half year underlying profits, a 10% rise in earnings per share and a 2% increase in interim dividend (88% franked). However, it’s shares have recently dropped sharply after some brokers warned it could face earnings pressure ahead with the downward pressure on wholesale power prices.

Chart: AGL share price (October 2018 to 4 June 2019)

Source: Yahoo Finance

Looking ahead, banks and financials are one of the sectors likely to benefit from the re-election of the Morrison Coalition government. Labor proposals to stop some cash refunds of franking credits, remove negative gearing on purchases of existing homes and the halving of the capital gains discount to 25% which had been hanging over the sector will not go ahead.

The banks should also benefit from future interest rate cuts. The Reserve Bank is widely tipped to lower the cash rate from the current low of 1.5% and while the banks have been quick to cut deposit rates, in recent times they have lifted mortgage rates out of cycle.

Also, APRA is considering lowering the 7% mortgage interest rate buffer banks must consider when assessing home loan applications which should provide a boost to home lending. Another positive at the margins is the government’s proposed First Home Loan Deposit Scheme which could help new home buyers secure a loan with a 5% deposit.

Learn more about SMSF investment in the following SuperGuide articles: