INVESTING
Challenging times for offshore equities
The US equity market is currently not doing investors any favours in their search for income, Hugh Selby-Smith writes.
HUGH SELBY-SMITH is co-chief investment officer at Talaria Asset Management.
20 selfmanagedsuper
An SMSF must pay age-based minimum amounts each year to a member from their pension account. As a response to the disruption caused by COVID-19, the federal government temporarily reduced these minimums by 50 per cent. However, on 1 July 2023 the minimums will revert to pre-pandemic levels. For example, an SMSF member aged between 65 and 74 will have to take as income a minimum of 5 per cent of their account balance, up from the current 2.5 per cent. At all times the challenge for SMSF members is to grow or at least preserve their capital while satisfying the rules regarding withdrawals. In cases where the assets of an SMSF portfolio generate less income
than the required minimum drawdown, retirees must sell down capital to fund the shortfall. This becomes a problem if they are forced to do this at the wrong time. For investors in global equities, this risk of being what is known as a forced seller is currently acute. Valuations are high Take the United States, which is the preferred international country exposure for many investors. US shares are expensive. At 30 times, the widely referenced, cyclically adjusted Shiller Price Earnings Ratio has hardly ever been more costly. What this means for the contribution to total return from capital