Understanding your SMSF’s Investment Strategy
Your investment strategy for your self-managed super fund (SMSF) is your plan for making, holding and releasing assets which should be consistent with your investment and retirement goals. It should set out why and how you’ve chosen to invest in order to meet these goals.
The superannuation laws require that you must prepare and implement an investment strategy for your SMSF which you must then give effect to and review yearly.
Your investment strategy should be tailored and specific to the relevant circumstances of your fund. Under superannuation laws, your strategy must consider the following specific factors:
- The diversification of funds investments
- Risks involved in making, holding and releasing, and the likely return from your fund’s investments regarding its objectives and cash flow requirements
- The risks of inadequate diversification within the context of the SMSF’s investment portfolio
- Liquidity of the fund’s assets
- Fund’s ability to pay benefits
- Whether to hold insurance cover
When preparing your investment strategy, it is not a valid approach to merely specify investment ranges of 0 to 100% for each class of investment. You also need to articulate how you plan to invest your super or why you require broad ranges to achieve your investment goals to satisfy the investment strategy requirements.
Your investment strategy should not be a ‘set and forget’ document. You should review your strategy regularly to ensure it continues to meet the current and future needs of your members depending on their personal circumstances.
Investment strategies must be reviewed at least annually. It must be documented that you have undertaken this review and any decisions that have become apparent from the review.