How do you know if an SMSF is right for you? Do you know the responsibilities of a trustee, and what happens if the fund doesn't follow the rules? Before you start anything new, it pays to know what you're getting into and whether it suits you. Here are some points to consider before starting an SMSF.
Know where you want to be. Everyone has different plans for retirement. Understanding how the fund's investment strategy can help you reach your goals is the key to a good outcome.
Understand risk. Once your goals are clear, work out your risk profile: how much risk you are willing to take, and how much you can afford to take.
Invest for the long term. Investing in the markets can feel uncertain, but it can be rewarding over the long term. Nobody knows when markets will rise or fall.
Know where to invest. There is no proven formula. But a fund spread across Australian shares, international shares, Australian and international fixed interest, property and cash has a better chance of reducing risk.
Understand your role. Not knowing what you're taking on can be costly. Before you set up an SMSF, make sure good governance is in place and you understand what you will be responsible for.
There's more to consider in part 2.
If you're a trustee, or thinking of becoming one, your accountant or financial planner can help you with these questions.