Implementing the right SMSF strategies

The fact that self-managed super funds have taken 50% of the superannuation market just goes to show that SMSF strategies have a high success rate if properly implemented. But choosing the right strategy for your super fund is not that simple. Before you make this choice it is important to create the right investment framework of the fund in therms of trustee's expertise in investment management and risk assessment of different strategies. Another important decision when laying the ground for investment strategies is choosing between diversification and investment in one class of assets. In most cases diversification is the better choice, but the choice itself depends on the trustee and his collaboration with fund members. Once you determine these aspects of the funds structure you can choose from several SMSF strategies trending these past few years.

Property investment

One of the most popular strategy in managing SMSF is property investment. Whether you will borrow to invest or just use the resources from fund members, the benefits that appear through this investment strategy are to good to overlook. The one major benefit that lures trustees in choosing this strategy is low or none tax expenses. The government is quite tolerant to super funds offering them tax return of 100 % if property is owned more than 12 months. If not, the tax is still lower than usual. Also, ease of set-up process and low costs make this option even more attractive in the eyes of investors. One small demotivation is that property bought through funds cannot be used for personal needs. So it can only be used to generate income through selling or renting.

Share investment

Besides the fact that popularity of this SMSF strategy is lowering, the benefits are still there. Just like property investment, buying shares on the stock market through super funds has tax related benefits. For instance, dividend taxation is facilitated through low tax rates and return policies. Furthermore, implementing this strategy requires opening a trading account for the fund at a traditional or an online broker. However if the trustee wants to have better control and overview over its stock investment portfolio, it is preferred to use separately managed accounts.

Cash and fixed interest investment

We know by now that an SMSF needs a certain amount of cash to cover operation costs and everyday transaction. Most super funds use a traditional transaction bank account to perform these activities without knowing that there is another option available. This other option is way more attractive because it offers investment in deposits with fixed interests that will be the backbone of your diversified portfolio. At the same time you will have your cash available to pay monthly bills for running the fund.

Source: Superannuation Warehouse