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Body highlights value of investment strategy

The need to have a written investment strategy within an SMSF has been emphasised by the volatility of worldwide equity markets over the past week, according to the SMSF Association.

“When markets fluctuate to the degree we have seen in the past week, then having a written, long-term investment strategy not only gives trustees peace of mind when markets are turbulent, but reminds them that superannuation is all about the long term,” SMSF Association technical and professional standards director Graeme Colley said.

Colley added having an investment strategy in place would help guard against panic decisions that were often made when share market prices were falling as dramatically as they had in recent days.

“When you consider an SMSF fund has, on average, about one-third of its assets in Australian shares, the reassurance the investment strategy provides cannot be underestimated,” he said.

The fifth annual “Intimate with Self-Managed Superannuation” research report, compiled by research house CoreData on behalf of the SMSF Association and nabtrade, revealed 50 per cent of SMSF trustees had a written investment strategy in place, with a further 30 per cent saying they delegated the responsibility to their financial adviser.

While Colley described that finding as encouraging, he expressed his anxiety about the remaining 20 per cent of SMSF trustees who did not have this compulsory and critical element in place.

“What’s concerning is that there are about one in five trustees who don’t have a written strategy, and it’s likely they will be more prone to making poor decisions, especially when markets are volatile,” he said.

“As the report says, ‘these trustees could be exposing themselves to investment and legal risks by not having an investment strategy or by only having it memorised and not written down’.”

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