Superannuation, to most people, is a “set and forget” scenario right up until a few years before it is time for them to retire. Although life is busy and the further we get into our careers the less time we have to focus on financial planning, it is imperative that on a yearly basis we take a step back and look at where we are spending our money and how we can maximise earnings and reduce outgoing expenses.
One of those elements that should be focused on when we do get the time to take a step back each year is our superannuation. This vital part of our income is often neglected as it does not physically sit within our bank accounts, nor can we spend it until a certain age. However, more recently people are sitting up and taking notice of their superannuation and how they can actively get involved with its growth and earning potential…
This active involvement is not just about choosing a superannuation provider, it’s about taking control of your very own nest egg and managing the entire entity yourself. While it is a huge responsibility, the freedom of a self managed super fund (aka SMSF) gives you the control that no corporate superannuation provider can offer. An SMSF actually allows you to invest your nest egg where ever you choose – stocks, bonds, property… it really is your call. In saying that though, it is important to remember that with the freedom of a self managed super fund comes a degree of commitment and attention that is far greater than any corporate super fund requires.
When considering swapping to a self managed super fund you must acknowledge that there will be a learning curve involved, unless of course you work in the superannuation industry! The first step is to know your weaknesses and understand the market you are dealing with. If you are not financially minded and struggle with numbers, you may want to go and seek out some level of education in the area to ensure you are not literally throwing your money away on dead end investments. Once you are armed with the knowledge of finance and superannuation, it’s time to learn about the market itself. Great questions to find answers for are:
o How strong has the economy been in the last 5 years?
o What have respected economists been saying about the market and have they been right so far?
o What are some safe avenues for investment while starting out?
o How often does the market shift? And do I need to monitor it daily, weekly, monthly or yearly to reallocate my investments?
o What returns will I see if I invest more time into my SMSF?
If you are confident you have the knowledge of the laws and legalities of an SMSF and you have the available time to not only monitor the market, but to also shift your investments accordingly then this form of superannuation may just be right up your alley.