Self Managed Super Fund – Investment Strategy

By Jason Fittler

When you are running your own Self Managed Super Fund one of the key elements is to ensure that you have an Investment Strategy. 

With recent changes to legislation it's now time to look at updating your investment strategy.

What is the investment strategy?

This is a comprehensive document, which details how you intend to invest for your retirement.

It is important to ensure that all of the trustees/members are clear on how the money will be invested and the risks they are prepared to take. This document should be reviewed at least once per year, normally when the financial accounts are prepared, to ensure that the strategy is still in line with the goals of the members.

It is important to ensure that there is sufficient detail in the Investment Strategy to provide guidance to your advisers on what your goals are and the level of risk you are prepared to take.

Be careful not to simply adopt an off the shelf strategy from your financial adviser or accountant. This may allow you to tick off this compliance measure but an Investment Strategy is more than a compliance issue.

The investment strategy should take into account the type of investments being shares, property or cash and a split between these investments.

  1. Shares - you need to look at which sectors you want to invest (i.e. only the ASX 200) and how large of small a company can be before you can invest. You need to consider if you want to invest in small speculative companies or highly geared companies. Also how much exposure you would like to have to these different sectors.
  2. Property - you need to consider if you will be looking to invest in direct property or through property trusts. One strategy is to invest in business real property ( the building your business works out off) if this is the case you should clearly indicate this in the strategy. 
  3. Cash - if you are currently invested all in cash because you are concerned about the market you need to ensure that your investment strategy correctly reflects this. You should also provide details on how much cash you will hold and how much is Term Deposits. Also you would need to define what you consider to be a cash investment.
  4. Insurance - this is a new requirement for a SMSF’s Investment Strategy. You need to outline your strategy on Life and TPD insurance. This does not make it mandatory to hold these types of insurance only that the strategy shows that you have considered what your requirements are and why this decision was made. Most investment strategies over 12 months old will most likely not have address Insurance as such they need to be updated. 
  5. Lending - if you are borrowing to buy property inside your SMSF then you also need to ensure that the strategy discusses what level of debt you can hold and that the members all agree to the increase level of risk this strategy incurs.

If you have not updated your Investment Strategy for some time now is a good time to look at doing so.

Super is a long-term investment, as such you need to continue to monitor your goals and benchmark performance.

Your Investment Strategy will assist with this process.

For more information please call us on 07 4771 4577.