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Christine St Anne is Morningstar's online editor.

Cash and Australian equities continue to dominate the portfolios of many self-managed superannuation funds (SMSFs).

A recent study by Macquarie and the SMSF Professionals' Association of Australia (SPAA) found that baby boomers who managed SMSFs had increased their allocation to both shares (46 per cent) and cash (12 per cent) over the past few years.

This research is backed up by a number of recent independent studies. Investment Trends also found those in this group had the highest allocation to direct equities, while also holding around 28 per cent of their assets in cash. Around 28 per cent had increased their cash holdings.

It's not surprising these SMSFs are taking an increasingly defensive approach to their investments. The Macquarie/SPAA study also found 44 per cent of these trustees had adopted a more defensive stance.

At the same time, these baby boomers are also largely focused on capital growth, with 60 per cent saying it is their main priority for investment selection, although 50 per cent sought out franked dividends and 33 per cent concentrated on capital preservation.

With these priorities in mind, the question is whether or not SMSFs are sufficiently diversified to meet those objectives.

Multiport technical services director Philip La Greca says the real question is not about diversification, but whether SMSF trustees have the strategy and process in place in order to meet their objectives.

The typical investment objectives include achieving a rate of return above inflation or outperforming a market index by a certain percentage.