Not only is an Investment Strategy mandatory for all SMSF it is critical to ensure that your superannuation fund maximises the return on its investments and minimises its investment risks.

Many SMSF that do not have an adequate investment strategy tend to invest an excess proportion of their funds in cash. For those SMSF, that are in the accumulation phase, their investments are not even growing at the rate of inflation. From an investment strategy perspective whilst the chance of a negative return is eliminated the growth of your members balance will almost entirely depend on the size of the contributions that you make to your SMSF each year.

The most successful superannuation funds, from our experience, have a clearly defined investment strategy. Characteristics of these SMSF investment strategies include;

Your age and your forecasted retirement date.

This sets a scene as to what type of investments may be appropriate for you. For example, if you are currently aged 40 years old and plan to retire at say age 65, then you have an investment time line of 25years. Therefore, your superannuation investment strategy may consider that direct property and Australian and international share may be appropriate. Conversely, if you are aged 60 years old and considering retiring at age 65 then shares and investment property are less appropriate.

Your retirement needs.

The strategy should take into account the amount of money you will need to draw from you superannuation account to maintain you standard of living in retirement.

What level of risk is appropriate?

Shares and property have more risk than cash and term deposits. However, if you are aged 60 now  and are in good health, believing that you will have a long healthy life, a percentage of the investments  in property or shares may be appropriate. Also if you have other assets such as cash and term deposits outside of you SMSF structure a portion of the SMSF investments in shares and property is likely to be both prudent and appropriate.

Liquidity

Most SMSFs have expenses such and accountant, audit and taxation. Therefore it is important to ensure that there is sufficient cash in the SMSF to pay the bill as they become due.

To assist in formulating an appropriate investment strategy for your SMSF, please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

 

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.  It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.