Investments, Strategy

SMSF strategies can help non-SMSF investors

SMSF; investment; strategy; investors

An SMSF investment strategy can provide essential guidance to investors, even if they don't have an SMSF, a personal finance expert says.

Investors without an SMSF can benefit from studying the investment strategies of SMSF trustees, according to an investment expert.

In a blog on the Vanguard Australia website, head of corporate affairs Robin Bowerman said the legal requirements of SMSF trustees to prepare, update and regularly review their investment strategies meant an SMSF investment strategy could provide guidance to most investors even if they did not have such a fund themselves.

“The mandatory SMSF investment strategy requires fund trustees to take into account such matters as investment risk, diversification, risks of inadequate diversification and ability to pay member benefits when due,” Bowerman said.

“This means the trustees of a fund have to consider the profiles of their individual members, including their individual tolerances to risk, ages, employment and their retirement plans.

“In other words, the investment strategy covers key principles of good investment practice.”

Bowerman pointed to the volatility of the current investment environment and said following the principles of good investment practice were particularly important in times of low interest rates and lower returns.

He cited Australian Superannuation Handbook editor Stuart Jones’s assertion that low interest rates could tempt investors to take a riskier approach to their investments as they chased a higher yield.

“Jones stresses that the requirement of an investment strategy ‘can help investors to maintain some discipline with their investment approach’ when rates are so low,” he noted.

Bowerman highlighted the commencement of super pension payments and the consideration of whether or not to hold insurance as key events for most SMSFs that would call for trustees to review their investment strategies.

He also noted the requirement of SMSF trustees to prepare an investment policy statement as a beneficial practice.

“This statement must cover a fund’s objectives, how those objectives are going to be achieved (including through asset allocation) and its investment strategy,” he said.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital