This SMSF investor isn’t chasing the ASX – he’s looking for global edge

It was meant to be a 15-minute call. It turned into an hour.

Michael Barrett and I quickly bonded over a shared love of history - not just as a series of past events, but as a lens through which to understand the world today. For Michael, history isn’t just something to study, it’s something to apply, and that is especially so when it comes to investing - thinking critically, questioning narratives, and staying curious.

Like many investors, Michael’s journey was shaped by the GFC. He got too close to the fire, realised the flaws in the traditional advice model, and decided to take matters into his own hands. That decision sparked a 20-year learning curve, and one that led him to create a self-managed super fund and build the financial future he and his wife wanted on their own terms.

Before we wrapped up, Michael said something that stuck with me: “In retirement, managing your finances becomes your full-time job.” That perspective of treating your pre-retirement years as the training ground really hit home. Given Michael started investing at around the same age as I am now, I found his story both hopeful and motivating.

I hope you enjoy this instalment of Meet the Investor. 

Profile

• Name: Michael Barrett
• Job: Semi-retired
• Age: 64
• Years spent investing: 20
• Investment goals: At this point in life (60+) to be debt-free and to structure our financial assets to provide us (in a modest way) with lifestyle options - and for these lifestyle options to be in both sickness and health.
• Products used: Cash management products (including foreign currency), ASX & international equities, bonds, private credit, and alternative assets. 
• Biggest investment: SMSF
• Secret (or not so secret) talent: I’m a history nerd (which is often useful in my investment research!).
• Guilty reading or viewing pleasure: I can’t dance (just ask my wife!) but for some reason I really enjoy watching “Dancing with the Stars”!! Go figure!

How did you get started in investing and what was your first investment?

I had been working for nearly 15 years when the SG Levy commenced in 1992. I wish the SG Levy had begun earlier! Like most other people at the time, I had to nominate a fund to direct my superannuation payments into and I had enough sense to find an industry fund of my own rather than the employers fund. From memory, the fund was National Mutual, which eventually became part of AMP. I think AMP was my first directly held stock. 

The GFC was an eye opener as to how the Australian investment management and financial services sector worked and performed, which eventually led my wife and I to set up our own SMSF.

How would you describe your strategy and your investment goals?

Initially, use the SMSF structure to gain control, direct the flows and manage your superannuation funds. Use devices like salary sacrifice contributions to maximise the flow of funds into your SMSF. Over time, build up a knowledge and understanding of the various asset classes, then begin to develop the skills to invest in and manage these asset classes. 

In terms of equity markets, the International market is vast, Australia is small and the ASX has little influence on global markets. Learn not to be distracted by “hot” stocks, “insider” tips, and learn the value of the saying “why would this person be wanting to tell me this?” - it’s one of the great “BS” detector strategies! Take the pressure off yourself - don’t become a day trader! 

Always have an overall total financial position that you are working to achieve in 5 to 7 year time periods and learn to allocate risk profiles to your various assets in order to achieve these financial outcomes. 

Most of the investment management and financial services sector is under constant time pressure - half year or annual results - you’re not, so use it to your advantage. The share market (in particular) ebbs and flows and often acts irrationally, so where you see an opportunity, take the profits or give yourself the luxury of being able to ride out a short-term loss.

What products do you use to execute your strategy?

Actually, it's quite conservative! Outside of our home, about 65% of total assets are in
various cash management products, including foreign currency. Of the remaining 35% they are split into ASX & International equities and bonds, private credit and alternative assets. 

I'm largely agnostic about the industry sector that these products operate in, it's about managing risk and how that sector might contribute towards our overall financial objective within that investment type. 

Unless it's an emerging market where we want to get a small exposure, I'm generally not a fan of ETFs, preferring instead to directly own a large stock which is held by multiple ETF products - I feel like I get the majority of the result that an ETF can give me whilst retaining control of the capital gains and dividend flows. It's a similar way of thinking with LIC, although I much prefer the investment structure of Investment Trusts (which operate in the UK, but not so much here in Australia).

Can you share your top 5 equity markets you're currently exposed to, and your biggest holding from each?

The ASX (only stocks where their majority revenue is ex Australia), the US, then Europe, UK, then China (via the Hong Kong market).

1. Australia - BHP (ASX: BHP) 
2. USA - Amazon (NYSE: AMZN) and Cameco Corp (NYSE: CCJ) 
3. Europe - SAP SE (XETR: SAP)
4. UK - British American Tobacco PLC (LON: BATS)
5. China (Hong Kong) - Ping An Insurance (Group) Co of China Ltd (HKG: 2318)

What investment is on your watchlist?

In terms of equities, it’s the Simandou iron ore mine in Guinea, which starts production later this year. It will fundamentally alter the flow of iron ore to China, which will have a big effect on Australia and ultimately all Australians. I’m amazed at how little discussion that this generates in Australia! Simandou has been jointly developed by Rio Tinto and the Chinese Chinalco and I’m sitting on BHP shares! I need to make a decision on how to manage this scenario!

What was your worst investment, and what has been your best?

I actually don’t have a “best” and “worst” investment - to me, when people talk like this, it’s the same kind of talk you hear at the TAB. What I do have is a spreadsheet called “trade in/trade out” - it’s where I keep a record of all of the stocks that I’ve bought in and exited out of and their present value. 

When I track it over a 5 year period, if the total value of ‘trade in/trade out” is close to zero then that’s telling me that overall, some stocks I should have continued to hold, others I’m glad that I sold, but from an overall financial perspective, I’m really no worse off.

What are your top tips for investing in an SMSF for those just starting out? 

Begin by getting the cash funds flowing in as quickly as you can and if you're a couple, that means the two of you! Also think about spouse super contributions. Initially, don't allow yourself to be influenced by the financial services industry and feel like you have to immediately invest in all sorts of investment products - each of those comes with a hidden cost! 

Start allocating your cash to term deposits/cash management funds, learn about equities, when you're comfortable, invest in a couple of safe options, observe the outcomes over time, then invest in some more. Learn about bonds, make a couple of safe investment options, observe the outcomes over time, then invest in some more and repeat the same process for private credit, alternatives etc. 

Understand risk management as part of constructing a portfolio, give yourself the luxury of extended time frames to ride out the inevitable ups and downs and have a financial goal that you are seeking to achieve in 5 year blocks. 

But most importantly, never stop trying to learn!

Can you share a personal passion or ambition you have for the future?

Your superannuation will largely dictate how you live the last 20 or so years of your life. For such an important area of your life, I’m alarmed at the lack of knowledge that most people have in a detailed understanding of how the Australian investment and financial services sectors work and the lack of focus of these sectors on International equity markets. I don’t see the next 10 years as being good for Australia, so the long-term superannuation risks for Australians are increasing. I adopt an “activist” approach to help highlight what I see as being important issues.          

If you are interested in sharing your investing journey, please send me a confidential enquiry by clicking the contact button at the bottom of this wire or by emailing team@livewiremarkets.com.

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