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SMSF Investment Options

SMSF investment option advice with Yield Financial Planning
SMSF Advisers SMSF are the best retirement solution for some investors

As your super balance grows, the flexibility of SMSF investment options can be alluring.

The author of this blog is a Certified Financial Planner and SMSF specialist with over 20 years of experience, advising clients on SMSF. I have an SMSF personally, and when they are suitable, there is simply no better way to manage your wealth for retirement.

Our blog for you today is a comprehensive guide about the SMSF investment options that exist. Including the considerations and possibilities that astute HNW investors can benefit from. 

The Advantages of SMSF Investment Options

  • Empowerment through Control and Autonomy  

At the core of SMSFs lies empowerment. SMSF gives you full control over your investment decisions, liberating you from the constraints of traditional superannuation funds. With an SMSF, you become the architect of your financial future. Seek financial advice where needed, to help align your investments accurately with your risk tolerance, financial goals, and market opportunities.  

  • A Suite of Investment Options 

Perhaps one of the most compelling advantages of SMSFs is the diverse range of investment options at your disposal. Far beyond the boundaries of other super funds, SMSFs allow you to invest in everything from equities, cash, and fixed-income instruments, to direct property, infrastructure, and alternative investments. Be very careful though to check your trust deed and in particular investment strategy. A suitably qualified financial advisor can also guide you on this, as nuanced rules exist. 

  • Unlocking Tax Efficiency and Long-Term Growth 

SMSFs offer the greatest opportunity for tax planning in superannuation. And with clever tax planning, you can significantly improve your long-term financial growth. Super has concessional tax rates on investment earnings and capital gains and this applies to all super funds. The benefit of SMSFs though, is that they offer an avenue for optimising your after tax outcomes. With the broad range of SMSF investment options, this opens alot of strategic planning opportunity.    

  • Potential Cost Advantages  

An SMSF must lodge an annual tax return and have an annual audit. This is a largely fixed cost, which is predictable and depending on your balance, can represent a very low starting cost base for your fund. On top of this, because SMSF’s are so flexible, there are a myriad of SMSF investment options that are highly cost-effective. Options like owning ETF’s purchased directly on the stock market, offer an ultra-low-cost solution. Cost advantages alone are not normally the reason to start an SMSF but can be a compelling compliment to why an SMSF could be suitable.  

Understanding Your Obligations – SMSF Trust Deed & Investment Strategy

An SMSF offers you almost the same freedom to invest as you have personally, however you are still governed by the SIS Act, and this means that you need to be aware of and follow the rules. Because an SMSF is also a type of trust, there is a trust deed, which sets out the rules for setting up and operating the fund. As a Trustee of your fund, it is required that you understand the SMSF Trust Deed and for the decisions you make to align. Furthermore, the fund must have an investment strategy, and this determines the parameters a fund may invest within. Ultimately the objective of all super funds, whether SMSF or not, is to provide for the members retirement and the trust deed and investment strategy, while flexible, are designed to help ensure this intent can be fulfilled. A Financial Advisor can support you to ensure you always remain compliant with the law and your obligations, while taking advantage of the flexibility and freedom that an SMSF can offer your retirement success.  

Wealth creation financial planning advice for retirement

Some SMSF Investment Options You May Choose

  • Equities and Shares 

SMSF members regularly invest in shares and equities and SMSF’s offer the most flexibility in this regard. The allure of dividends and the potential for capital appreciation, mean careful tax planning can lead to advantageous outcomes. In Australia we have franking credits, which see some SMSF investors generating tax refunds for their funds, contributing to their total return. Shares also provide liquidity to make highly strategic purchase and sale decisions, considerate of the overall strategy of the fund.  

  • Property Investment: Crafting Wealth Through Tangible Assets 

The property market is one reason Australian’s often look to SMSF. From residential to commercial properties, this investment avenue offers the promise of rental income and potential capital gains. Property investments can make sense for super funds, particularly for HNWI’s, that transition a large percentage of their wealth to superannuation for retirement and have sufficient other resources to provide diversification and liquidity around the property asset/s. SMSF may also be a suitable wealth creation strategy as SMSF’s can borrow to invest as well.   

  • Cash and Fixed-Income Investments: The Pillars of Stability 

Striking a balance between risk and stability, allocating a portion of your SMSF to cash, term deposits, or bonds provides a foundation of stability and security. These more conservative choices safeguard your capital while offering steady returns, acting as a counterweight to more volatile investment options. 

  • Balancing Your Portfolio with Alternative Investments 

SMSFs open doors to all number of alternative investments. Investments that may only be accessible to direct investors, such as in private equity, hedge funds, and venture capital, may deliver solid returns with lower correlation of returns to your broader portfolio. Large Super funds like industry funds invest in these types of assets, however SMSF offer the opportunity to invest in them in a highly personalised way, made considerate of your specific risk profile and liquidity constraints. This journey demands a deep understanding of alternative markets, risk assessment, and careful due diligence. 

  • A Touch of Opulence: Precious Metals and Commodities 

SMSFs provide the avenue to add a touch of opulence to your investment strategy. Precious metals like gold and silver, along with commodities such as oil and agricultural products, act as hedges against inflation and global uncertainties. These tangible assets introduce an element of diversity and stability to your portfolio and may be a favoured SMSF investment option. 

Navigating Risk & Crafting Strategic Frameworks

Effective risk management is crucial for all financial planning and SMSF offer the most flexibility to deliver on suitably risk managed portfolio’s. Risk extends to the volatility of your investments, but equally importantly, how well your portfolio meets the liquidity needs of the funds members or in other words you and your family. The principles of diversification, meticulous asset allocation, and continuous monitoring form the bedrock of a resilient SMSF investment strategy. Navigating the ever-changing market landscape requires vigilance, adaptability, and a commitment to your long-term financial goals. 

How Yield Financial Planning Can Help

Yield Financial Planning are SMSF specialists and several of our clients have a SMSF. They are the preference of many High Net Worth investors and with good reason. For help managing your SMSF or to enquire about the suitability of an SMSF for you and the SMSF investment options that exist, contact us today.  

Important Note
Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.

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Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.