With your retirement goals in place, having an investment plan that ensures you meet those goals is essential.

An investment strategy is how you will make, hold, and realise assets consistent with your plan.

Superannuation laws require you to not only prepare and implement a strategy, but also update it regularly.

The Australian Tax Office (ATO) published their guidelines on self-managed superannuation funds earlier this year, to help SMSF trustees and professionals navigate the process.

What is an SMSF investment strategy?

Your SMSF investment strategy is the road map to your retirement goals, factoring in your future capital requirements and risk tolerance.

Some investors want rapid growth, while others prefer a lower risk strategy with a wealth protection emphasis. The ATO’s guidelines for SMSF investment strategies, updated in February 2020, state that an investment strategy must be tailored and specific to the circumstances of the fund.

By law, this can’t be a generalised document – it must outline how your investments will be managed.

There are a variety of factors that you should take into account when creating your investment strategy.

What to consider when creating an SMSF investment strategy

Here are some key factors to consider when developing your SMSF investment strategy:

• The risk of the investments and the likely return from them, bearing in mind the objectives of the SMSF and any cash flow requirements
• The diversification of the fund’s investments, which means allocating your savings in a way that reduces your exposure to any one particular asset, asset class, or risk
• The cash flow needs of the fund’s members, such as payment of tax, superannuation excess contribution and Division 293 liabilities of members, rollover if a member leaves the SMSF, and regular pension payments
• The fund’s ability to deal with liabilities, current and prospective
• Insurance for your fund and the policies around this.

Why an SMSF investment strategy is important

Creating a sound investment strategy for your self-managed super fund is one of the smartest ways you can grow your retirement savings. It’s your guidebook to where you need to go and how to get there.

Your investment choices must be for the sole purpose of providing retirement benefits for your fund, or you could miss out on tax concessions and face civil or criminal penalties.

A clearly defined and diversified long-term investment strategy will keep your SMSF on track and help to guide your fund through any uncertain times.

Where investments do not have adequate diversification, we have considered the risks involved and believe them to be acceptable, taking the member’s current situation and requirements into account.

When to update your SMSF investment strategy

Revisiting, and possibly revising, the purpose and circumstances of your SMSF fund every year is advisable to ensure retirement goals and projected outcomes are still relevant and achievable.

Whenever there are changes in the circumstances of your fund, it’s imperative to review and update your investment strategy.

Trigger events, such as market corrections, should also prompt you to re-examine your investment strategy and make necessary adjustments.

Protect your retirement with an updated SMSF investment strategy

Regularly checking in to ask difficult questions about your SMSF investment strategy is the healthy and prudent approach to managing your superannuation fund. This ensures that you aren’t putting all of your eggs in one basket and that your self-managed super fund is still on track to achieve its goals and the cash-flow requirements of all of its members.

If you need assistance with creating or reviewing your SMSF investment strategy, the experienced team at LDB Group can help.

LDB’s superannuation experts can assist in a strategy review and provide compliance guidance to ensure your SMSF meets the legislation and the ATO’s expectations.

The team can help with establishing SMSFs and offer expert assistance to trustees with financial statements and annual returns.

To speak with one of our trusted superannuation experts, give us a call on (03) 9875 2900 or fill in the contact form below.