Self-managed superannuation funds (SMSFs) are looking to benefit from any market rebound that may occur in the near future through the use of gearing, according to Quantum Warrants national sales manager Michael Kolikias.
Not only has the market recovery sparked a renewed appetite for using leverage to invest in equities, but also the changes handed down in the most recent federal budget that imposed a reduced contributions cap from 1 July onwards.
Furthermore, the recessionary climate currently pervading the market has seen a reduction in interests rates, making gearing strategies more attractive right now.
While SMSF investors are looking towards gearing to boost their diminished asset levels, they are doing so with caution.
For example, Quantum Portfolio offers an instalment warrant product that allows SMSF trustees to borrow up to 70 per cent of the total asset value, but the majority of people are only using gearing levels of around 40 to 50 per cent.
“When it comes to managing risk, a diverse portfolio in quality companies and conservative borrowing is the key,” Kolikias said.
But while leverage is being used by SMSFs to get back into equity markets, Kolikias said investors still needed to maintain a long-term investment horizon to enable them to manage the market volatility over a period of time.
“Having enough saved in super is at the top of people’s minds as they rethink their long-term growth strategy,” he said.
