What is diversification in an SMSF?
Diversification spreads an SMSF’s investments across different assets and sources of return. By holding a mix of investments, the performance of the fund is less reliant on any one investment, sector or market.
No single asset class performs best in every market environment. Spreading investments across different asset classes can help create a broader, more balanced portfolio over time, as different investments can perform differently at different times
Diversifying across asset classes
One way to diversify is by investing across different asset classes. The main asset classes generally include shares, fixed interest, property and cash. Each asset class has different characteristics and can perform differently over time.
Shares represent ownership in companies and returns may come from capital growth and dividends.
Fixed interest investments, such as government and corporate bonds, may provide regular interest income.
Property investments can generate rental income and may increase in value over time.
Cash investments, such as savings accounts and term deposits, can provide interest income and ready access to funds, depending on the investment.
Because different asset classes do not always perform in the same way at the same time, holding a mix of investments can help reduce reliance on any single type of investment.
Diversification through managed funds
Managed funds can provide a way to access to achieve diversification within an SMSF.
A diversified managed fund can invest across several asset classes, such as shares, fixed income and cash, within a single investment. This can provide exposure to a broader mix of investments without each investment needing to be selected individually. The level of diversification will depend on what the fund invests in, so it is important to understand the fund’s investment mix and strategy.
A great diversification example is our Diversified Growth Fund that provides exposure across six asset classes within a single investment; offering a simple way to access a diversified portfolio
Key benefits of SMSF Diversification
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Broader investment exposure; provides access across different asset classes, sectors and markets.
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Different sources of return; investments can contribute through income, capital growth or a combination of both.
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A more balanced portfolio; different investments can perform differently at different times, helping create a broader investment mix.
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Less reliance on one investment area; spreading investments means the portfolio is not centred around one asset, sector or market.
Please note
This article has been prepared by Selfund for general information and education purposes only.
It has been prepared without taking into account your individual objectives, financial situation or needs. Before making any investment decision, you should consider whether the information is appropriate for your circumstances and seek independent professional advice where appropriate.
Did you know...
More than half of SMSFs now hold ETFs
51% of SMSFs held at least one ETF in 2025, with diversification the most commonly cited reason among ETF users.