SMSF Investment Strategies

Investing and SMSF strategies

Investments

You can select investments across the various asset classes. These include shares, both domestic and international, as well as Exchange Traded Funds, listed and unlisted property and fixed interest including subordinated notes and bonds. There is also a large portion of funds presently in cash including term deposits. The exposure and amount you invest in each asset class should suit your risk tolerance as well as the Investment Strategy of your fund.

Due to the myriad of different investment options, all with varying characteristic, having a professional investment adviser to assist you is generally the best solution.

SMSF Strategies & Opportunites

When it comes to SMSF strategies, the real power of a SMSF becomes evident!

Self Managed Super Funds can take advantage of broader strategies not easily available through normal superannuation channels. This includes borrowing to invest, enhanced trustee discretion, family superannuation funds and estate planning.   T

A not so well known strategy of a SMSF is the superior ability to direct funds to the right beneficiaries. When you start to understand some of the powerful strategies that can be employed in a SMSF, especially from an estate planning perspective, it is easy to see why a SMSF starts to become viewed as a tax advantaged intergenerational wealth vehicle . In addition, SMSFs can easily make non lapsing binding nominations, unlike commercial super funds which generally have to be continually updated.  

One of the biggest advantages is the ability to control the timing of asset sell downs thus minimising CGT issues.

In addition, for those members nearing the pension phase, a SMSF offers a lot of flexibility in terms of how you go about it. 

What is an Investment Strategy?

An Investment Strategy is a plan for the investment objectives of the fund as well as the implementation of the relevant SMSF strategies. Every  SMSF is required to have one, and once formulated it must be adhered to. The good news is that an Investment Strategy can be updated via trustee minutes over time.

The strategy should explain why trustees have made the relevant investment decisions also how the trustees intend to achieve the fund’s retirement benefits for the members (sole purpose).   An investment strategy must be reviewed on a regular basis and updated as required.  

A good Investment Strategy will give you a wide choice of assets to invest in and overall strategies. It’s a good idea to consider a wide range of investments as well as a vast array of SMSF strategies. 

One overlooked area within an Investment Strategy is Risk and Return. Risk is a possibility of loss on an investment. There is a strong correlation between risk and return. This means that the Trustee must determine an acceptable level of risk and volatility of the returns in the light of the SMSF’s circumstances. Generally, a target asset allocation and its potential variance should be included. 

Trustees should consider the death and disability insurance needs of each member. Insurance can be held within a SMSF.  

 

 

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