SMSF Investment Strategy

I believe that Self Managed Super Funds (SMSFs) are absolutely fantastic vehicles for wealth building, asset protection, saving tax and looking after your family when you die.

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However – they are not for everybody.

This article will look at the reasons why somebody simply shouldn’t have a SMSF. As you are reading, examine your own motivations for having a SMSF or wanting to set one up.

To death do us part:

A SMSF is like a marriage – it takes a significant commitment and a bit of hard work when required to make it run smoothly. If you are the type of person who doesn’t like to commit to things long term, then chances are a SMSF is not for you.

Be honest with yourself and look at your history – if you have previously jumped around between different jobs, businesses or even countries the chances are that an SMSF is not for you. With a SMSF you will have regular financial and time commitments to make it work effectively.

You need to spend the time to manage your investments and money to administer the fund.

Jump on the bandwagon:
Unfortunately in my time I have seen a lot of people who have been to the latest weekend ‘investment’ seminar and get caught up in the hype – whether it be on share trading, options, CFDs, currency trading/FOREX or property.

Come Monday morning they are calling their accountant to have a SMSF set up.

If you see your current superannuation savings as money you can easily access to start trading today and making millions tomorrow, chances are you are going to end up disappointed and left with an empty SMSF.

When it comes to any type of investing you need to educate yourself. Unfortunately for most people the education system and their upbringing does not provide them with a financial education.

You need to learn to walk before you can run. This means starting small with your own money (an amount you can afford to loose) and if you do OK gradually increase your commitment as your knowledge and experience grow. DO NOT pull $30k, $50k or $100k from your current super fund, assume you know all there is to know and use it to invest in the latest flavour of the month investment.

I am not putting myself forward as some financial guru who has all the answers. I also don’t have a problem with people going to investment seminars and educating themselves – I believe everybody can benefit from further financial education.

What I do say is based on experience. I have seen too many SMSF car crashes – in part it is the reason I write these articles – to help educate people.

Who stole the cookies?

An SMSF is great if you want to take control of your financial future by actively managing your investments under a long-term well considered investment strategy.

A SMSF is not so great if you are the type of person who can’t resist stealing the cookies from the cookie jar.

You need to be honest with yourself – if you have previously dipped into your savings account to buy that must have item, then chances are with the potentially significant amount of available funds in your SMSF you may be tempted again.

Worse still, if you are intentionally establishing an SMSF to early access to your superannuation savings before your retirement then a SMSF is not for you. Unless you enjoy fines of up to $220,000 and up to 5 years in jail.

These illegal early access schemes and their promoters are currently the bane of the ATO’s SMSF compliance department – and the ATO is throwing significant resources at the problem to stop it and if you read the papers and the ATOs press releases they are getting results.

If the thought of using your superannuation savings for anything other than your retirement has ever crossed your mind, then a SMSF is definitely not for you.

Summary:

An SMSF is a great vehicle for your wealth – but you need to ensure you are setting one up for the right reasons!

Take your time, educate yourself, talk to other people with SMSFs and talk to your accountant or financial adviser.

There is an investing technique that will lower market risk and allow young investors to benefit from long-term growth. This technique is called dollar cost averaging; and it’s a great technique to combine with broad based index fund investing.

Visit our site to know more about SMSF Investment Strategy and quickly learn all about SMSF Investment Strategy from one of the leading  authorities online.

Long-term gains using a dollar cost averaging plan.

Dollar cost averaging allows young investors to purchase stock investments consistently over a longer period of time. This stock market strategy works especially well with broad-based market index investments like the mutual funds and ETF’s that mirror the return of the S&P 500. This powerful and simple investment plan will help lower risk and you have the potential for higher returns.

For young investors looking for consistent gains over time, establishing a dollar cost averaging plan could be a perfect solution. Young investors are able to purchase more shares when the stock market experiences short-term corrections. That way when the index turns around and starts heading up in value young investors are able to profit more because they own more shares.

When the market is rising young investors are able to capitalize on the market trend because they are following a consistent investment plan. As they purchase more and more shares in a bull market that money is going to work for them right away.

Dollar cost averaging spreads the prices that you purchase stock market investments (cost basis) over a longer period. Investors are protected from stock market corrections and benefit from long-term gains in the market.

Steps to creating an effective dollar cost averaging plan.

For young investors creating a successful dollar cost averaging plan is simple. There are two basic steps that will get your money working for you:

1. Decide on the exact amount of money you will invest each and every month. The key to a successful dollar cost averaging plan is consistency. You can increase your investment over time but avoid investing different amounts each month.

2. Set up the exact times you invest. If you decide to invest once per month do so on the same day. For instance, the fifth of every month invest $150. This is made simple with help from an automatic investment plan. Set this up one time and your investments are made automatically for you each and every month. All you have to do is check your statements to see how your investments are doing.

Improve your dollar cost averaging plan through diversification.

Diversification is a simple spreading out the risk of owning a stock investment by owning many different stocks in a variety of sectors. Owning a group of stocks, instead of an individual stock, could further reduce your risk. This will reduce the risk of owning any single investment. The investment of choice for many young and beginning investors is broad based indexes.

An example of a broad based market index is the S&P 500. By investing in the S&P 500 index you own a piece of every stock that makes up the S&P 500. Stocks like American Express, Google, Ford, Nordstrom, Home Depot, Staples and Yahoo are a few of the stocks that make up that index. That way you’re protected in case one of the stocks in the S&P 500 drops 70% of its value, you’re only invested 1/500th, and you won’t experience too much loss from that. In comparison, if you just owned that stock by itself you would have lost 70% immediately.

For young investors, keeping your investments diversified and using a dollar cost averaging investing technique – you have effectively reduced risk and are in an excellent position to achieve long-term profits.

There are many safe options that you can make and even some riskier ones that can be very beneficial to your self managed super fund. The most important way to keep your SMSF safe in a downward market is to listen to your financial advisor. They can help you tremendously to stay on track.

Visit our site to know more about SMSF Investment Strategy and quickly learn all about SMSF Investment Strategy from one of the leading  authorities online.

Follow The SMSF Investing Trend

Investing is very tricky, especially during a downward market. The first place to start when it comes to managing your self managed superannuation fund is to follow the trends. There have been some incredible upsets where people were sure that their stocks would continue to stay stable while in reality they dropped quite dramatically – (please provide example or reference).

Continue to review your stocks and investments on a weekly basis and you will begin to see the trends. Work closely with your financial advisor to learn their opinions, making sure you follow a positive trend.

Research Your Investment Decisions

When it comes to SMSFs, do your research. There are many investors that are rather lazy when it comes to super funds. You have to work closely with your trustees and financial advisors during hard economic times to ensure your superannuation fund continues positively on its course.

Investments need to be made through informed choices. When you make well researched decisions during bad economic times, you are normally going to see the benefits, but the wrong move can bring immediate declines throughout your portfolio.

Ignoring Excess Noise

When you make an investment decision, make sure that you are buying and selling through recommendations, not just risky decisions. During unstable economy situations, it’s possible to make hasty decisions.

It’s easy to become overwhelmed with what TV analysts are saying about stocks and portfolios, how the market is doing overall, even comments that people make to one another. Therefore, you need to eliminate this ‘noise’ in order to make sound decisions. If you cannot, it may be wise to talk with your financial advisor.

Try not to invest in high risk situations unless you can afford a loss. In a declining market, you need to be a lot wiser because you may not be able to make up a large loss. Cut back on your riskier deals and lower the amount that you would normally make on such investments.

You may just want to stick to high interest accounts instead of major investments in order to keep your SMSF safe in a volatile market.

Since 2007, guidelines surrounding superfund policies have changed, allowing you to invest your superfund money into property. Instead of purchasing the property outright, you can now borrow 60 to 75 per cent of the property’s value from your SMSF.

Visit our site to know more about SMSF Investment Strategy and quickly learn all about SMSF Investment Strategy from one of the leading  authorities online.

If you are interested in tax benefits, you will also receive them as an extra perk along with growing your assets.

What Property Types Can You Purchase?

As you will be purchasing an asset, you can buy just about any type of property that you are interested in. This includes residential, commercial, retail and rural properties, along with land – even holiday apartments.

However, since the goal of purchasing this property is for investment, you are not allowed to move into the property to live. If you are thinking about changing homes, you will not be able to borrow money from your SMSF.

What’s The Process?

If you are going to purchase property by borrowing from your SMSF, you will have to go over the process with your lawyer and financial advisor to make sure that it’s appropriate for your circumstances.

The following is a basic overview of what is required throughout the process:

• A lawyer creates a property trust on your behalf.
• Once you find the property in question, you place a deposit on and borrow anywhere from 60 to 75 per cent (or less) from your SMSF.
• The property trustee officially purchases the property and become the premise’s legal owner.
• You give a property mortgage to the lender of your SMSF and any rent that is received for your property is deposited directly into the SMSF, allowing you to pay off the loan.
• Ultimately, the only entity that benefits from your new asset is your SMSF fund.

What do You Need to Invest in Property?

When you decide to borrow money from your SMSF for property investment, you should take the following four factors into account:

• You need to be able to pay back your loan, so ensure there is enough money for repayments.
• Not all SMSFs allow borrowing for property assets, so make sure that yours does before beginning the process.
• Make sure that investing in property is a part of your investment strategy and that your SMSF will benefit from such a decision.
• Sometimes there are additional costs which you must also be able to cover such as legal fees, lender’s fees, taxes, interest, accounting fees and insurance.

If property investment sounds like a good investment strategy for you, then you may want to talk to your financial advisors so that you can make the best choice.

If you are an SMSF holder, it is always recommended to have a diverse portfolio. In the case that one of your ventures should go awry, then at least you will still have your other investments to lean back on. If you invest large sums of your money into one stock or property, however, you could be taking a huge risk. Recently, many people have been finding more comfort in investing in some type of real estate, rather than in foreign currency, stocks or shares.

Visit our site to know more about SMSF Investment Strategy and quickly learn all about SMSF Investment Strategy from one of the best leading website authorities online.

Many people did not think that they would ever have enough money to invest in such things as property. However, now that self managed super funds can be opened up by anyone with a savings of more than $150,000, it is becoming a lot easier. SMSF and property investment are tax effective and are an excellent way to set yourself up for asset protection.

Nonetheless, you must have an exceptional SMSF structure and investment plan in order to purchase property as a means of investment. Property investment through an SMSF is rather difficult to perform correctly, so you will need to speak at length to financial advisors and lawyers.

Obviously these consultations will incur additional fees, yet these financial advisors and lawyers will make sure that the property investment and SMSF is solid so that it does not jeopardise your self managed superannuation fund in the long run.

It is important that you comply to all of the laws that monitor property investment via an SMSF. One important thing to remember is that since this property investment serves as an asset, you cannot use this property to live in.

Essentially you can purchase the real estate and resell it for a higher price, which will automatically be deposited into your SMSF. Alternatively, you can lease out the property to individuals, families or businesses and this rental income will go directly into the super fund account as well.

Purchasing property via your SMSF can be an excellent investment strategy, if you are prepared. Property investment is not for everyone, but it is strongly advised that you speak to your financial advisor or accountant if it seems like a good investment strategy for you.

Since 2007, guidelines surrounding superfund policies have changed, allowing you to invest your superfund money into property. Instead of purchasing the property outright, you can now borrow 60 to 75 per cent of the property’s value from your SMSF.

Visit our site to know more about SMSF Investment Strategy and quickly learn all about SMSF Investment Strategy from one of the leading  authorities online.

If you are interested in tax benefits, you will also receive them as an extra perk along with growing your assets.

What Property Types Can You Purchase?

As you will be purchasing an asset, you can buy just about any type of property that you are interested in. This includes residential, commercial, retail and rural properties, along with land – even holiday apartments.

However, since the goal of purchasing this property is for investment, you are not allowed to move into the property to live. If you are thinking about changing homes, you will not be able to borrow money from your SMSF.

What’s The Process?

If you are going to purchase property by borrowing from your SMSF, you will have to go over the process with your lawyer and financial advisor to make sure that it’s appropriate for your circumstances.

The following is a basic overview of what is required throughout the process:

• A lawyer creates a property trust on your behalf.
• Once you find the property in question, you place a deposit on and borrow anywhere from 60 to 75 per cent (or less) from your SMSF.
• The property trustee officially purchases the property and become the premise’s legal owner.
• You give a property mortgage to the lender of your SMSF and any rent that is received for your property is deposited directly into the SMSF, allowing you to pay off the loan.
• Ultimately, the only entity that benefits from your new asset is your SMSF fund.

What do You Need to Invest in Property?

When you decide to borrow money from your SMSF for property investment, you should take the following four factors into account:

• You need to be able to pay back your loan, so ensure there is enough money for repayments.
• Not all SMSFs allow borrowing for property assets, so make sure that yours does before beginning the process.
• Make sure that investing in property is a part of your investment strategy and that your SMSF will benefit from such a decision.
• Sometimes there are additional costs which you must also be able to cover such as legal fees, lender’s fees, taxes, interest, accounting fees and insurance.

If property investment sounds like a good investment strategy for you, then you may want to talk to your financial advisors so that you can make the best choice.