Investing through your SMSF can seem simple, but keeping a fund on track needs a working knowledge of markets and of the superannuation rules. Many trustees follow their instincts. A good investment strategy instead balances growth, tax and the needs of every member over many years.
Before you take the do-it-yourself route, here are five tips for a sound strategy.
1. Get professional advice
Good advice is most valuable when you're starting out. A licensed financial adviser can help you set objectives and choose investments. If you're investing for your retirement, it pays to learn from people who do this every day.
2. Diversify
Spreading the fund's money across different kinds of assets reduces risk over the long term. Because super is a long-term investment, think about assets that can grow over time, such as shares and property, alongside fixed interest and cash for stability and for paying the fund's costs.
3. Keep up with the rules
Superannuation rules, caps and thresholds change, and the ATO updates its guidance. Super law is set nationally, so the same rules apply wherever you live in Australia. Keep track of what's new, or ask your accountant to tell you.
4. Understand the tax
A complying SMSF pays tax at concessional rates on its income. To keep those concessions, the fund must follow the rules, be audited each year and lodge its annual return. Make sure your strategy takes tax into account, but never let tax be the only reason for an investment.
5. Have the fund audited every year
Every SMSF must be audited each year by an approved SMSF auditor, registered with ASIC, before the annual return is lodged. The audit checks the fund's accounts and whether it has followed the law, and it can tell you what needs fixing.
If you're a trustee, your accountant or financial planner can help you prepare and review your strategy.