It’s time to think about your investment strategy
You’ve made it through the financial year and navigated the new superannuation laws. These took effect on 1 July 2017. There is one thing you should always think about and that’s your investment strategy.
As a trustee you are required to review your investment strategy regularly. This is to ensure it continues to reflect the purpose and circumstances of your fund and members.
An important requirement for you as trustee of your SMSF is to have an investment objective. Similarly a strategy to achieve that objective before you start making decisions. These could be about how you want to invest your SMSF’s funds. Whatever assets you choose for your SMSF to invest in. There must be a clear and obvious retirement purpose in the choices you make.
An SMSF investment strategy must take into account the following:
The risks involved in making, holding and realising the SMSF investments. Their expected return and cash flow requirements of your SMSF.
The diversification and composition of your SMSF investments.
The liquidity of your SMSF investments, having regard to expected cash flow requirements.
The SMSF’s ability to pay current and future benefits to the members.
Whether to hold insurance cover for each member of your SMSF.
When preparing your investment strategy it is important to remember the following. The investment objective and strategy is not set in stone. Trustees can choose to change the investment objectives they have set for their SMSF at any time. In light of this, the broader economic risks should also form part of your decision making.
Looking ahead to the 2018 fiscal year these may include whether United States President Donald Trump can succeed on his economic promises. The looming threat of North Korea and the United Kingdom’s pending ‘Brexit’. Whilst domestically slow wages growth, rising housing costs and a potential interest rate rise from the Reserve Bank of Australia could all weigh in on the economy.
The following practical tips will help you keep on top of your obligations:
Seek Professional advice regarding your investment objectives.
Put your investment objective and strategy in writing.
Set an investment objective that you can achieve with the underlying investments you are comfortable to invest in.
There is no template for an investment objective and strategy. Make sure they reflect how you intend to invest your SMSF’s money.
The investments you actually make must be contemplated by the investment strategy you have set.
Additionally, document your actions and decisions, as well as your reasons. Therefore keep them as a record in order to demonstrate that you have indeed satisfied your obligations and as a trustee in this important area.
Please feel free to give me a call to answer any questions or concerns you may have in relation to your SMSF’s investment strategy.