Investing for SMSF Trustees
The SMSF sector has grown to be the largest in the superannuation industry for three main reasons. Members want to:
- control their own superannuation and not leave it to others,
- reduce administration costs,
- have control over where their superannuation is invested, and
- invest directly in such things as property and shares.
This section is all about showing trustees how to avoid what happened in “investing 101”. Trustees of an SMSF need to have the vision of the investments they want, their investment strategy, so that they end up with the money for their retirement.
One of the major lessons to come out of the GFC was the importance of diversification. Before all of the celebrated crashes in the tightening of credit many investors were blissfully ignorant of the huge risk they were taking by having the majority of their funds predominately in one investment sector.
Some SMSF trustees that relied on financial planners for advice suffered the double impact of being over invested in certain asset classes and the value of their investments eroded by high commissions.
The Future Of Financial Advice reforms that applied from July 2013 should improve the quality of investment advice all inverstors receive. The two major components of these reforms will be the requirement for advisers to put the interests of their clients first and the banning of conflicted remuneration, in other words commissions.
Anyone that received investment advice prior to July 1, 2013 get none of the benefits of the financial advice reforms. This is because the new requirements only apply to advice given from July 1, 2013.
Unless you are happy to have the value of your investments eroded by trailing commissions paid to advisers that you rarely if ever see, or the advice given produces very little benefit, everyone that received advice prior to one July 2013 should review all of their investments to make sure that the adviser’s hand is not in the investment pocket.
The topics covered in this section of the SMSF Survival Centre include:
- the requirements of an SMSF to have an investment strategy
- understanding investment risk
- understanding investments
- how to reduce risk and the importance of diversification
- portfolio construction for SMSF trustees