Many of our clients use superannuation to secure their future financial independence.

Trustees of super funds, including Self-Managed Super Funds (SMSFs), are required to have an investment strategy that meets certain guidelines. These guidelines provide useful insight into smart investment strategies that you can apply more broadly.Money

 

Risk versus return

Trustees are required to consider the risk and expected level of return when investing, taking into account:

  • the member’s risk profile
  • their proximity to retirement and
  • any other relevant circumstances.

These considerations should be reviewed regularly as members’ needs change throughout their life. Should members of an SMSF have different risk profiles, the trustee may hold separate pools of assets to ensure the funds are invested appropriately for all members.

Your risk profile

Allocating a greater portion of your assets to riskier investments offers the chance of higher returns. However the upside of possible higher returns has to be balanced against the increase in volatility and variation of potential returns.

Diversification

Trustees of super funds are required to regularly consider whether the fund’s investments are adequately diversified. Diversification is an approach of spreading your investments across different asset classes, industries, market sectors, or potentially geographic locations.

Diversification of asset classes may help to manage risk if one specific asset class performs poorly. For example, your return from term deposits may decrease due to lower interest rates. However the property market may be growing as a result of these lower interest rates.

Diversification of industries and market sectors within a specific asset class is also an effective way of managing market risk. For example when the mining industry suffers from reduced commodity prices, the tourism industry may be growing due to increased international tourist activity. Or sometimes when one country’s economy drops, another country’s rises. The diversification of investment by geographic location can help to take advantage of such movements.

Liquidity: How easy it is to get to your money?

SMSFs in particular must have the correct levels of liquidity to be able to fund its ongoing operating costs.

If all of your investment monies are wrapped up in a property and its maintenance costs, you may find yourself struggling with other SMSF costs such as accounting, administration, reporting, financial advice, and lodgement.

Liquidity is just as important if you don’t have an SMSF but are saving for retirement. You should consider how much can you afford to keep in superannuation (where it’s generally locked up until after you retire) and how much should be invested outside of superannuation. You also need to consider how much should you keep in cash, and how much in other less liquid asset classes which may offer higher returns over the medium to long term.

Insurance

The final investment strategy requirement for the SMSF trustee is to consider whether they have adequate levels of life and disability insurance for their members.

Sound financial plans can be put into jeopardy if the main ‘bread winner’ or the person who cares for their dependents suffers a serious illness or dies without insurance

What does it all mean to me?

At Moiler Partners, we can help you with a carefully considered investment strategy that considers insurance, risk and asset allocation to your financial and retirement goals. A Self Managed Superannuation Fund can be an excellent vehicle to help reach these goals.

To better understand the areas that we can help at different stages of your life, please view the Moiler Partners Astute Wheel – a fast easy visual guide on the areas for discussion based on your circumstances.

Alternatively feel free to complete the Moiler Partners 5 Minute Health Check which will provide us with a fast self assessment of your circumstances which we can discuss with you.

We are always available for an obligation free discussion, so please contact us.