Is it Time to Ditch Your Super Fund and Start an SMSF?

The Australian Prudential Regulation Authority recently revealed that around $10 billion of Australians' retirement savings are locked in underperforming superannuation products, with fees for the largest industry super funds rising nearly 20 per cent over the past three years. So, with more money going out than coming in, given the cost of living crisis, is it time for investors to consider switching to a Self-Managed Super Fund (SMSF), and is it a suitable option?

What stocks should you consider for an SMSF?

While an SMSF offers greater control over your investments and the opportunity to enhance returns, it’s not for inexperienced investors without the right knowledge. One of the most important criteria for your SMSF's success is demonstrating that you can invest profitably before moving away from traditional superannuation. It's also critical that you understand how to select the right type of stocks, which are solid companies with a long trading history. It's not about high-risk, high-reward speculative stocks but about taking safe risks and being active in managing your portfolio.

If you feel ready to make the switch, or if you are already managing your own SMSF, here are three mid-cap stocks that could be excellent additions to your superannuation portfolio.

Washington H. Soul Pattinson (SOL): This diversified investment company has interests across various sectors, including telecommunications, financial services, building materials, and resources. Since 1998, its share price has consistently trended upward despite the occasional downturn. Historically, SOL has shown a pattern of reaching new all-time highs every 4 to 6 years. It’s currently been 3 years since the last all-time high, making SOL a very promising proposition at current price levels.

Next is AGL Energy (AGL): As Australia’s largest energy provider, AGL has a trading history dating back to the mid-1980s, demonstrating its resilience and long-term viability. The share price has recently surged over 90 per cent from a long-term support level of $5. If this upward momentum continues, the potential return to its all-time high of $28 presents a compelling growth opportunity, making it a strong candidate for a super fund.

Lastly, Cleanaway Waste Management (CWY): With a growing population and increasing consumerism, the demand for waste management services is rising. Cleanaway has stabilised and shown a positive trend since 2015, after a volatile start following its ASX listing in 2005. The share price has recently broken out of a two-year consolidation period, indicating the potential to return to its long-term uptrend, making it a perfect stock for a superannuation strategy looking to outperform.

What were the best and worst-performing sectors last week?

The best-performing sectors included Financials, up 3.91 per cent, followed by Consumer Staples, up 3.40 per cent and Real Estate up 3.08 per cent. The worst-performing sectors included Energy, down 1.77 per cent, followed by Information Technology, down 0.69 per cent and Materials, down 0.45 per cent.

The best performing stocks in the ASX top 100 included Treasury Wines, up 6.53 per cent, followed by The Lottery Corporation, up 6.16 per cent and Insurance Australia Group, up 5.81 per cent. The worst-performing stocks included Liontown Resources, down 10.77 per cent followed by Xero and Mineral Resources, both down 4.23 per cent.

What's next for the Australian stock market?

With the market up over 1.78 per cent and achieving its highest weekly close since last March, it's clear that buyers are determined to keep the previously mentioned 7,900 level support intact. In last week's report, I mentioned that it would be interesting to see if this level would hold and the buyers did not disappoint, as they stepped in to drive the market higher.

Last week, I also mentioned that I was not completely ruling out the idea of a mid-year low in June. However, this week's movement pretty much closes that door. While there is still time for this to occur, further rises next week will all but rule out this scenario.

Given probability is now more on the side of the market rising, let's consider what to expect if April's low is indeed our mid-year low. If this is correct, the market should rise during the third quarter, particularly in July, which is historically one of the strongest months for the All Ordinaries Index. My target for this rise is between 8,200 and 8,400 points.

So, with a strong market move anticipated, where should you invest to maximise your returns?

Looking at the sectors, the tech and financial sectors have led the way in the past year, as both are up over 20 per cent. If this trend continues, as I expect in a rising market, investing in stocks within these two sectors could significantly enhance your portfolio performance. Notable stocks in these sectors that have recently made significant moves include Westpac Banking Corporation (WBC) and Data 3 Limited (DTL), so make sure to check them out.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.