SMSF or Self Managed Super Funds are one of the best options when anyone wants to plan their future after retirement. This is mainly because you can have full control and flexibility over your SMSF and use it to invest your monies wisely. In fact, the very basic rule associated with SMSFs is that the trustees must decide and implement an investment strategy. It is basically a detailed plan of the finances that is put together by the trustees of the fund. More or less, all strategies are a set of rules, which are the driving force behind various investments to be done in the future by the trustees.
How to prepare an SMSF investment strategy?
Any investment strategy is set in place to achieve most or all of your SMSFs investment objectives. Speaking of investment objectives, they can be pre-decided and set by the trustees. They can do this by going through the profile of each fund member in detail. They can also analyse various assets and risk tolerance of the members to achieve the objective.
Once an investment objective is in place, the trustees can move towards preparing an investment strategy by using their knowledge. This is the reason why it is mandatory for all trustees of the fund to have a detailed knowhow of financial terms such as SMSF borrowing or SMSF auditors to take an informed decision that benefit each of the fund members.
Now let us take a look at some of the nitty gritties associated with SMSF setup.
Although there are numerous investment options to choose from, three of the most popular ones are direct shares, property investments and cash. Apart from these, you can also invest in collectible, managed investment schemes, listed and unlisted trusts among others.
An investment strategy takes into consideration the present financial needs as well as the future financial needs of each fund members. Moreover, it is planned out only after a detailed analysis of each of the members risk preferences.
→ It is the trustees, who have to take the decisions regarding investing the fund assets and document and monitor the performance on a regular basis. If required, they may even update the investment strategy for the people.
→ Sometimes, it is essential to update the SMSF investment strategy as and when there is change in risk preferences or the financial expectations of the members, the introduction of a new member, death of a member or deteriorating health of a member among other reasons.
There are also certain investments that are prohibited. To understand this, the very first thing that the trustees should ensure is that they must comply with the latest SMSF laws. Some examples of prohibited investments are as follows:
→ The SMSF should not make loans to any fund members or their relatives
→ Any investment made should not breach any rules
→ There are restrictions on acquiring assets from related parties, which much be observed
So, this was SMSF investment strategy is a nutshell. Do post your comments about the same and feel free to share your tips as well.