The investment strategy for the SMSF is the key to make, control, and manage assets that are being consistent with the investment objectives of the SMSF Member including retirement goals. The goals should clearly specify why this specific investment is being made and how this has to be made. It is necessarily required that the taxpayers must first prepare and then implement the investment strategy for the self-managed super fund (SMSF). Apart from this, the strategy must be effectively reviewed on a regular basis.

What are the factors of the SMSF’s investment strategy?

It is always necessary that all the investment strategy is recorded in writing. It should be adjusted and precise to the relevant state of affairs. While documenting the investment strategy, the trustees need to understand that this is not any ordinary document. This is not just about containing the legal terms and conditions but also, the requirements and outcome of the fund.

The relevant conditions may be inclusive of but are not limited to personal situations viz. age, employability, and retirement goals. These factors would greatly influence the risk factor for the trustees.

This also explains the investment strategies wherein every member should be aware of how to meet their retirement objectives. Also, the laws must also consider the following specific parameters which would further decide the fate of the fund:

• Risks involvement which would control, hold, and realize the estimated return from the investments. This includes the fulfillment of the fund’s objectives and cash flow requirements.
• Fund investment composition which is inclusive of the extent which is diverse of the range of assets and asset classes. This also includes the risks of inadequate diversification in funds.
• Fund assets liquidity because they can get converted to cash for fund expenses. This includes fund and income tax expenses management.
• Pay for benefits for the members who retire. The retiring members may require the lumps sum amount or regular pension so this would be suitable for incurring the costs.
• Insurance cover should be done or not depending upon life, permanent, or temporary incapacity insurance for every SMSF Member.

While hatching any investment plan, the best and valid approach is to specify the investment range from 0% to 100%. This technique is not limited to any particular investment but is applicable to every class of investment. The plans should also include how and why the plans can fulfill the investment goals.

The fund allocation with respect to the funds’ assets which is invested in every class of investment should be made. However, the fund allocation should be able to support and reflect the calculated investment approach for the achievement of the retirement goals of the trustees. If the allocated percentages in the investment strategy are not utilized, then the trustees need to ensure that the material assets are being listed in the investment plans. Also, the reasons for investment in those assets may also be listed as per the retirement targets.

To conclude, the investment strategy for every SMSF requires meticulous planning and expertise to fulfill the trustees’ retirement benefits, investment plans, and saving targets.