What Can You Invest in With Your SMSF?

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One of the biggest advantages of an SMSF is that the trustees get to make the investment decisions. This is probably the number one reason why many Aussies choose to establish their own self-managed superannuation funds. When it comes to investment choices in an SMSF, the range of options that you can put into consideration is also quite broad.

These investment options can include:-

  • Direct investments such as those on income securities, shares, ETFs, term deposits, bonds, cash and gold/silver bullion among others.
  • Property investments including units, villas, residential properties and commercial properties such as land, shops, industrial property, office complexes and warehouses.
  • Managed funds: These can include retail, wholesale as well as domestic and international funds.
  • Invest in a business or business property
  • Invest in cryptocurrencies and initial coin offerings or ICOs
  • Purchase non-traditional assets such as rare coins, art, antiques or ATMs.
  • Private unit trusts

Before you begin shopping for an asset or an investment vehicle, you must ascertain that your Trust Deed in the SMSF allows you to invest in the particular assets or items that you are considering. Read through the document and ensure that your preferred assets are allowed for in the deed. It must specifically name these assets. If an asset is not mentioned in the Trust Deed, have the document updated to ensure everything falls in the right category.

If you are satisfied that the Trust Deed covers your preferred investments, look at your SMSF’s investment strategy and determine the types of investments that it will hold. These can be formulated by you as well as other SMSF members. If you don’t have a strong investment background, you can consult an SMSF investment specialist to assist you in structuring out your fund investments for maximum yield.

The investment strategy for any particular SMSF must reflect the objectives, risk profile, the liquidity along with the kinds of investments that the trustees plan to use. Additionally, the SMSF investment strategy must be fine-tuned regularly to optimize the yield and maximize on new investment opportunities. It is not just a question of set and forget and the fund need not have a single strategy. Different members in the fund can have different investment strategies to suit their objectives and risk tolerance.

Investing with an SMSF offers tremendous advantages to members. You will be in total control of the funds that you have accumulated over time and with the right investment strategy, you can easily dictate the pace at which you are building your wealth and capitalize on the right investment opportunities that you feel will serve your needs.

With an SMSF, you aren’t locked in like is the case with other types of investments. This is particularly so in the retail market. A self-managed superannuation fund allows you to grow your investments to your satisfaction and build a comfortable retirement nest egg. It is a huge difference from the retail investment providers that typically lock the investors in the “pension phase” into income-producing assets with limited growth potential. An SMSF makes it possible for you to go for the high-risk and high-reward growth assets even during your pension phase.

However, it is important to understand the various regulatory limitations that apply when it comes to SMSF. A self-managed superannuation fund, for example, is not allowed to borrow money for investing in shares or property unless these funds have been provided via a Limited Recourse Borrowing Arrangement.

An SMSF can also not acquire assets that are connected to the members of the fund or invest money in an in-house asset. For example, your SMSF fund cannot purchase your residential property from you. The funds are also not allowed to lend money to the members or their relatives. An SMSF cannot provide its assets as security for any personal borrowing by its members.

Hopefully, this brief guide will be of help as you plan to invest with your self-managed superannuation fund. If you need more information or guidance on how to make the most prudent investments with your SMSF, you can hire a professional accountant Melbourne or SMSF investment advisor to help you make the right decisions for your wealth building needs.

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