Many thanks to Christina from the SMSF Investment Strategies Blog for today’s post. Christina will be sharing a series a posts on the timely topic “Is a SMSF right for you?” Christina is outlining three key questions to ask yourself when deciding to establish a SMSF. Be sure to check #1 Compliance.
Question 2 – Do you have the time and skills?
‘Self managed’ super means you do the work. You must work out an investment strategy. Then you must select and manage investments well enough so they grow in value and meet your fund’s investment objectives. As a trustee of your own fund, even if you get help, you remain legally responsible.
Time
If you have a full-time job / business and a lot of family responsibilities, it can be hard to find the time manage your investments. Many SMSF trustees simply leave their funds in cash because they are too busy to find and evaluate good investment opportunities. When interest rates are high, this is probably not a bad option. However, interest rates have come down to 3-4% and this is not a good return, especially if inflation continues at a rate of 3%. Other busy trustees may outsource the investing to others but to me this defeats the purpose of having a DIY fund in the first place, and may be less cost effective as retail managed funds tend to have higher fees compared to industry super funds.
Skills
One of the most popular investments for SMSFs is listed securities i.e. direct or indirect shares. In a recent Share Ownership Study conducted by the ASX, they found that there are four types of investors whom they have named Confidents, Aspirationals, Diligents and Delegators. On one end of the scale are the Confidents who rate themselves as knowledgeable or somewhat knowledgeable. Although they do not see themselves as experts, they are eager to find out more about the share market and they are the most active information seekers. On the other end of the scale are the Delegators who have neither knowledge nor interest in the share market. They have investments, but they delegate their management to others. They get none of the energy and excitement from the markets that others do.
I definitely fall into the Confident category and if you think you are this type of person (or aspire to be one), you will probably do well to have your own SMSF as you are prepared to spend the time needed to manage your investments. However, if you are more of a Delegator, you may be better off staying with a good public super fund. SelectingSuper and Superatings are two sites that can help you find a top performing public super fund, if you are not happy with your current super fund.
Not having the skills should not put you off having a SMSF. If you have the desire to learn and are prepared to devote the time and some money to invest in yourself, you can develop the necessary skills over time. To me, this is a worthwhile investment as we all will need to live off our investments when we retire.
To help new SMSF Trustees, I have started to a blog to share some of the simple investment strategies that I have used for my SMSF. You can find out how to prepare an investment strategy and access a repository of free and inexpensive educational resources to learn the investment strategies discussed. If you are interested to know more, do visit us at http://blog.sli-smsf.com.
The SMSF Investment Strategies website is aimed at supporting the Self Managed Super Fund (SMSF) Trustee and Retail Stock Investor community. I’d encourage anyone considering a SMSF to inform themselves fully, visit the site and take advantage of the knowledge and experience Christina has shared.
Stay tuned for part 3 in this series…
Article by Christina
Christina is a Trustee and Chief Investment Officer for SLI Superannuation Fund, a Self Managed Super Fund set up in March 2007. In addition to managing the investments for her SMSF, she also actively trades options in the US market for her family owned investment company.
Christina has written 3 awesome articles for us at Alan Lewis Accountants – BLOG
