Creating A SMSF Investment Strategy

As an SMSF trustee, you have control over your finances. It’s up to you to pick good investments and decide on the best strategy that will help grow your money faster and get closer to your financial goals.


What assets do you want to invest in? Will you stick with stocks, bonds, managed funds, and real estate? Or will you include less conventional assets like options, artworks, warrants, and precious metals? How about cryptocurrencies?


An SMSF investment strategy will decide how your money will be distributed into each asset and which asset types you can invest in.


What Is An SMSF Investment Strategy?


An SMSF strategy is the plan for investing, holding, and realising assets that are in line with the financial objectives and retirement goals of the fund. It should detail why and how you will invest in an asset to meet goals. It should be a plan specific to the fund’s circumstances rather than being a document created just for the sake of compliance.


An SMSF investing strategy is different from a statement of advice or financial plan. It is proof that trustees have agreed to a strategy on how their monies will be handled and are obliged to follow it.


The ATO states that SMSF trustees have to come up with a written investment strategy that must be regularly reviewed. Failure to comply can result in penalties.


Asset allocation is recommended but isn’t required by law to be included in the investment strategy.

You can invest in any asset so long as it is within your investment strategy and belong to permitted investments under super laws.


The SMSF auditor will regularly check the SMSF’s investment strategy as part of the fund’s annual report.


Things to Consider


Here are the factors to consider in developing an SMSF investment strategy:


Risks and return

In formulating an SMSF investment strategy, specifying investment ranges for each asset class alone isn’t valid. The investment strategy should articulate the need for target ranges in achieving the goals of the fund.


In creating an investment strategy, stipulate the minimum and maximum allowable investment ranges. Include the investment timeframe of each member and their risk tolerance. The percentage of assets allocated in each class should reflect its relevance in achieving retirement goals.


Fund composition and diversification

Whether the investment strategy calls for international investments or borrowing arrangements, all of them must be detailed. Explanations behind each investment plan must be presented and defined how they can help achieve the fund’s goals.


Age of members

The age of each member should be considered. A member in the early accumulation stage will have different risk preferences and financial objectives compared to one who is in the late accumulation stage.


Insurance requirements of members

Consider instances wherein you or an SMSF member happens to be terminally ill, permanently disabled, or pass away. The fund can offer members insurance for these situations, depending on the investment strategy.


Liquidity of the fund

There should be enough liquidity to answer SMSF expenses and liabilities like audit fees, bank charges, annual fees, and pension payments. The investment strategy should consider these factors in deciding which assets to invest in. Real estate is illiquid and harder to sell compared to stock shares.


Get Help From A Financial Adviser


If you’re unsure about creating the right SMSF investment strategy, it’s best to seek help from a professional financial adviser.

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