How to plan your SMSF investment strategy

Having full control over where your super is invested and creating an investment strategy that aligns with your personal values, interests and investment objectives is exciting, and one of the biggest appeals of starting an SMSF. Not only will a well-documented investment strategy benefit members of the SMSF, but it is a legal requirement.

Let's take a look at why it’s so important to have a clear investment strategy for your SMSF, the different types of assets you can invest in and what to consider when putting your strategy together.

Compare online investment platforms for your SMSF

Choosing the right platform to build your portfolio can have a direct impact on the returns of your SMSF. Factors like brokerage fees, international fees and available markets are important to consider when choosing the right investment platform for your needs.

Compare a range of investment platforms below to find the one that best suits the purposes of your SMSF and your overall investment strategy.

• Trade Shares
• Invest with a Robo Advisor

Updated December 7th, 2019

Sort by:

Name	Product	Monthly fee	Standard Brokerage Fee	Margin trading - Online
IG Share Trading		$0	$8.00 or 0.1%	Yes	Special offer: Earn up to 10,000 Qantas Points when you start trading on a new IG Share Trading account. T&C applies. Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.	Go to site More Info	Compare	loading Fetching your data...
Saxo Capital Markets (Classic account) 2019 Winner		$0	$6.99 or 0.1%	Yes	High quality, low-cost brokerage on global share trading. Access up to 19,000 global stocks on 36 of the world’s major stock exchanges and enjoy some of the most competitive FX rates on the the market when you trade with Saxo Capital Markets.	Go to site More Info	Compare	loading Fetching your data...
SelfWealth Share Trading (Basic account) 2019 Winner		$0	$9.50	No	Trade ASX-listed shares for a flat fee of $9.50, regardless of the trade size. New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.	Go to site More Info	Compare	loading Fetching your data...
Bell Direct Share Trading (Silver account)		$0	$15 for first 10 trades	Yes	Offer: For a limited time, get a custom deal based on your trading preferences when you switch to Bell Direct. Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.	Go to site More Info	Compare	loading Fetching your data...
CMC Markets Stockbroking (Classic account)		$0	$11 or 0.1% for first 10 trades (for trade value up to $11,000)	Yes	Access a broad range of investment products from Australia and overseas. Take advantage of IPOs and trade shares, warrants, options and CFDs listed across the ASX, SSX and Chi-X, and other major global exchanges, including US, Canada and UK markets.	Go to site More Info	Compare	loading Fetching your data...

Compare up to 4 providers

Clear selection

Compare

Updated December 7th, 2019

Sort by:

Name	Product	Annual fee on balances less than $5000	Annual fee on $5001 - $9999 balances	Annual fee on $50,001 - $99,999 balances	Annual fee on $100,001 - $199,999 balances	Minimum Deposit	Investments Used	Number of Portfolios
Six Park		N/A	N/A	0.50%	0.50%	$10,000	ETFs	5	Invest in Australian and global shares, property, infrastructure, emerging markets, bonds and cash with Six Park.	More Info	Compare	loading Fetching your data...
Clover		$60	$60	0.60%	0.55%	$2,500	ETFs	5	Invest in Australian and global shares, cash, fixed income/bonds, property and emerging markets.	More Info	Compare	loading Fetching your data...
Spaceship Voyager (Index Portfolio)		$0	0.05%	0.05%	0.05%	$1	Equities	1	Invest in Australian shares, global shares and cash markets.	More Info	Compare	loading Fetching your data...
Spaceship Voyager (Universe Portfolio)		$0	0.10%	0.10%	0.10%	$1	Equities	1	Invest in Australian shares, global shares and cash markets.	More Info	Compare	loading Fetching your data...
Stockspot		First 6 months free then $5.50 per month	First 6 months free then $5.50 per month	0.66% per year inc GST + access to Stockspot Themes	0.66% per year inc GST + access to Stockspot Themes	$2,000	ETFs	5	More Info	Compare	loading Fetching your data...

Compare up to 4 providers

Clear selection

Compare

Why should I have an investment strategy for my SMSF?

How you invest your super through your SMSF will determine how much money you can retire with, and ultimately the type of lifestyle you can live throughout your retirement years. A bit of planning now could mean you retire with thousands (or hundreds of thousands!) more later.

But as well as benefiting you and the other members of your SMSF, it’s also a legal obligation. Under the current super laws set by the ATO your SMSF must have an investment strategy in writing that outlines your fund’s objectives and strategies for achieving those objectives. This isn’t something you can do just once, you’re also required to regularly review and adjust the strategy to ensure it’s always meeting the needs of members and the fund’s overall goals.

Setting your SMSF investment objectives

The objective of your SMSF is the overall goal you’re trying to achieve. The ultimate purpose of any SMSF is to fund a comfortable retirement for its members. Try to be as specific as you can with your investment objective by working out how much money your SMSF will need to generate in order to fund the retirement of its members.

For example, some people might be aiming for a simple, but comfortable, retirement that won’t require as much money as someone planning a retirement full of overseas travel. You can take a look at our guide on how much money you’ll need in retirement to help with this.

Setting your SMSF investment strategy

Now it’s time to put your investment strategy together. Your investment strategy should outline what your SMSF will invest in to achieve its objectives.

What you can invest in through your SMSF

You have much more freedom and flexibility with your SMSF investments than you would with a standard retail or industry super fund. The range of assets your SMSF can invest in are almost unlimited. Among the most popular assets for SMSFs to invest in are Australian shares, cash and direct property (residential housing and commercial property).

Some other assets you can invest in include, but are not limited to:

• Australian shares: Invest in ASX-listed companies such as Telstra or Woolworths.
• Global shares: Individual global companies that aren’t listed on the ASX, such as Apple, Netflix or Google.
• Exchange traded funds (ETFs): ETFs track a particular index, such as the ASX200 and are a good way to get exposure to a large range of shares at once. The same goes for listed investment companies (LICs). Learn about the difference between ETFs and LICs here.
• Commodities: You can invest in popular commodities like gold and silver, or more unique commodities like coffee or sugar.
• Residential property: Your SMSF can buy an investment property and rent it out to benefit from both capital gain of the property, as well as regular income from the rental payments. You can read more on property investment below.
• Commercial property: You can also invest in shops and storefronts, commercial office space or land.
• A business: You can invest in a business and earn some of the profits as investment income.
• Derivatives. If you have trading experience, you can invest with high-risk derivative products like CFDs or forex.
• Cash: Choose to have some of your funds invested in cash in the form of a savings account or term deposit.
• Antiques and collectibles. Your SMSF can buy art, antiques, rare coins and collectable items like stamps that could go up in value the longer you keep them.

BankVic SMSF Saver

BankVic SMSF Saver

1.60 % p.a.

max rate

1.60 % p.a.

standard variable rate

BankVic SMSF Saver

Ongoing, variable 1.60% p.a. Available on balances up to $5,000,000.

• Maximum Rate: 1.60% p.a.
• Standard Variable Rate: 1.60% p.a.
• Monthly fees: $0.00

Go to site

More info

Investment restrictions to be aware of

There are some limitations around how you can invest via an SMSF. Here’s some things to be aware of when developing your investment strategy:

• You can’t combine assets. You cannot combine your personal assets with your SMSF assets, these must remain separate. For example, you can’t lodge one tax return listing both personal and SMSF assets, these need to be lodged separately with the ATO.
• Your SMSF assets cannot be for personal use. For example, if you invest in a property you cannot live in that property.
• You must follow the “arm's length” rule. This means you need to invest in assets that are not tied to you or other members, and assets need to perform in line with market expectations. For example, you cannot invest in a property and rent it to a friend at a lower rate.
• Assets are held in the SMSF name. Assets need to be held in the name of the SMSF, not individual members.

SMSF property investment

You can invest in residential property as part of your SMSF investment strategy, but there’s a few limitations to be aware of first.

• You can’t purchase the property from another member in the SMSF or another member’s relative.
• You can’t live in a property that’s been purchased by your SMSF nor can any of your relatives.
• You can’t rent the property to another member in the SMSf or to another member’s relatives.
• You can’t rent the property to someone you know for less rent than you otherwise would (in other words, no "mates rates"!)

The property must be bought in the name of your SMSF and kept separate to any personal assets. Investing in property has many advantages including providing rental income as well as capital gain (which means the property itself should grow in value). But there are also lots of costs involved with owning a property, including legal fees, stamp duty, maintenance fees and property management fees.

Because residential property is such a large purchase, especially in major cities like Sydney or Melbourne, you’ll need to make sure a property fits within your wider investment strategy. It’s a good idea to make sure you have enough funds to invest in a range of other assets too, to ensure your SMSF investments are well diversified.

SMSF property loan offer

Please note that very few lenders still offer SMSF home loans. A mortgage broker could help you find suitable products from specialist lenders.

Tips for developing your SMSF investment strategy

Now that you know what you can and can’t invest in, it’s time to put your strategy into place. Here’s some important things to consider when you’re deciding which assets to invest in:

• Your life stage. Consider the personal circumstances of all members and what life stage they are in. For example, if the members are all quite young (eg under 40) you may want to invest in higher risk assets like shares and property. If you’re closer to retirement you’ll probably want less risk, by investing more heavily in cash, term deposits or bonds. This is because high-risk assets generally perform well over longer periods of time, but there might be a few big market dips along the way.
• Your risk tolerance. Regardless of age, you should also consider how comfortable the members are with risk. You may be young, but there’s no point investing in high-risk assets like US stocks if it’s going to keep you awake all night, every night.
• What’s happening in financial markets. You need to consider what is happening in various financial markets when deciding on your investment strategy. You may want to invest heavily in Australian shares, but it’s important to do your research and see how the local share market has performed over recent years. You may find that international shares have produced stronger returns (or vice versa). You need to monitor financial markets and adjust your strategy on an ongoing, regular basis in line with market movements.
• Diversification. Don’t put all your eggs in one basket. You should invest in a range of different asset classes from the list above, and a range of different assets within those classes too. For example if you’re investing in shares, make sure you have a mix of stable blue-chip stocks as well as riskier, high-growth companies. You can read more about the importance of diversification in our guide here.
• How much cash you need. Cash is not only a low-risk investment option, but it’s also readily available for any expenses your SMSF may need to pay. Your SMSF will have ongoing operating and admin costs, which can’t be paid if your money is completely tied up in assets like property.

Keep track of your holdings with Sharesight's portfolio tracker

Sharesight Portfolio Tracker

Sharesight works alongside your online share trading platform and can be integrated with your Xero account.

• Free for investors with less than 10 holdings
• Comprehensive dividend and tax reporting
• 25+ stock exchanges supported

Go to site