What’s Really Involved With an SMSF?

I believe it is unnecessary for me to mention the importance of an SMSF as there are many proofs that it is one the most effective ways to ensure secure, comfortable and happy retirement days. It is considered one of the most popular retirement funds in Australia and every year more and more Australians turn to it with the goal to ensure a stable retirement income. Simply said, there is no better way to invest your super savings for the years to come, than with an SMSF.

When it comes to setting up an SMSF, one of the most important things to do is create a good investment strategy. It is required by the law and the Australian Taxation office has set strict rules regarding it. It must be designed in a way to not only increase the retirement benefits of each fund member, but to also protect their interest. In fact, this is a vital feature as it reflects the choice of investments. In an investment strategy, there are multiple choices of assets to invest in. However, according to SMSF experts, it is always a wise choice to consider cash, share and property investments, as wider SMSF strategies bring more benefits to the SMSF members.

As mentioned above, an SMSF investment strategy should be based on the current and future financial needs of each trustee. It is a vital part of the SMSF managing. Because it ensures the fund is always in compliance with ATO investment guidelines, it should be reviewed regularly. An SMSF investment strategy should cover areas that include:

-Risk management of the main investments and strategies that will help maximise the returns, taking in consideration the fund risks such as volatility, liquidity and cost;

-Ensure the fund can cover all the costs, such as taxes, member retirement benefits and any other costs associated with running your SMSF;

-Choose the right asset class (cash, term deposits, direct property, etc.). It is important to decide in which class you will invest and if this will reduce or manage risk in the long run;

-Determine your needs and the level of risk you are willing to take by knowing your earnings capacity, contribution levels, retirement needs as well as insurance levels.

As an SMSF trustee, you have to ensure that all your investment decisions are made according to your SMSF strategy. You can prepare and execute an SMSF investment strategy yourself, if you have the skills, knowledge and time to do so. If not, a strategy created by an investment professional or a financial adviser is a guarantee for fruitful returns.

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