SMSF Strategies: Purpose, Objectives, Risk & Diversification

There is no need to highlight the importance of the Self-Management Super Fund (SMSF), since it has proven to be the most effective way to ensure secure, comfortable and happy retirement. This is one of the most popular superannuation funds in Australia that more and more Australians turn to in order to ensure fruitful retirement income. In other words, there is no better way to invest your savings than with the Self Management Super Fund.

SMSF strategies

One of the essential things when it comes to setting up an SMSF is to create a good investment strategy. This is actually that vital feature which normally reflects the choice of investments. Simply said, the SMSF investment strategy offers multiple choices when it comes to types of assets to invest in. SMSF experts suggest that it is always a wise choice to consider property, share and cash investments, because wider SMSF strategies bring more benefits to the SMSF members.

What Is An SMSF Investment Strategy?

The SMSF investment strategy is defined as profound and detailed investment plan that all SMSF trustees make according to current and future financial needs of every trustee (member of the Self Management Super Fund). Before the fund can function legally in terms of investment and SMSF strategies, it has to previously pass the ‘Sole Purpose Test’.

What Are The Objectives Of The SMSF Strategies?

The main blueprint of every SMSF investment strategy is to obtain an average yield of 6% from all investments. The only way to reach this goal is to consider the needs of every SMSF member. Important facts that need to be taken into account are:

  • growth targets,
  • every trustee’s risk profile, and
  • retirement date.

What Risks May SMSF Strategies Bring?

There is a thin line between a risk and return. The loss of an investment is considered as the greatest risk of an SMSF investment strategy. For this purpose, when setting the fundamentals of the Self Management Super Fund (including SMSF strategies too), all trustees should agree on the acceptable level of risk and volatility of the returns.

Why Diversification Of SMSF Strategies Is Important?

There are multiple reasons that support the diversification of fund’s investment strategies. First of all, the diversification is good to manage and disperse all potential risks. It is also desirable for efficient reduction of the volatility of the returns on the investments. However, diversification is hard to achieve in the early stage of the fund’s existence, as the amount of investment-available funds is quite limited.