In an economy where many things are uncertain and returns aren’t as high as they used to be, many people are looking at their options when it comes to superannuation. But when it comes to managed or self managed super funds, what are the differences?
Managed Funds
Corporate (the fund your employer uses to pay your super), industry or retail funds have long been the “norm” for many people, trusting that when it is time to retire there will be a healthy little nest egg sitting there, just waiting to be enjoyed. But, like anything, there are two sides to every story.
The Pros
o It takes little attention from your end to manage the fund (if any at all)
o The managed super fund looks after all of the legal requirements
o Managed super funds have been around for years
o A professional is responsible for a huge chunk of your money
The Cons
o A managed fund is based on a bull market – if it falls over, your superannuation fund will suffer
o You can’t manage the performance of your fund, nor can you diversify it
o You can’t control where your money is invested – your super is exposed to the investment strategy of the managed fund
Self Managed Super Funds
When you decide to take on your own super and manage it yourself, it’s a massive burden, but also a massive release to know that you’re in charge of your own retirement. To manage your own super, you will need to educate yourself on all the laws and regulations that come with it, along with the finance and investment market. Although you’ll be armed with a sense of freedom, this type of fund does have its own set of pros and cons.
The Pros
o You have total control of your super fund
o You can choose where to invest the money – stocks, property, bonds, cash, etc
o You can save money on fees
o You can maximise your returns
o You can salary sacrifice
The Cons
o You are responsible for a huge chunk of money which is ultimately your future – if you invest poorly and lose all your money, it’s nobody’s fault but your own
o You must have the spare time to manage your investment strategy and ensure you are investing wisely
o As the trustee of your self managed super fund, you are responsible to carry out all the required duties and adhere to all of the super laws you are bound to.