Call us on 1300 794 893

Your Money

I have the funds, but is a SMSF right for me?

| More

I am interested in setting up a self-managed super fund, or a SMSF as they are often called, but I am not a really organised person. I do like investing — buying stocks, holding them for a while and selling them after making a nice profit and dumping dogs ASAP. Do you think a SMSF is for me?

I am 48 and have about $275,000 in my super fund while my wife has about $120,000. I am currently with a retail super fund, which my boss put me into. The returns have been okay but I am paying about 1.3 per cent in fees to the fund.

In terms of the key factors that might make me suggest a SMSF, I think you and your wife tick a lot of boxes. First, you have over $200,000, which I say is a decent starting amount for a SMSF. In fact, if you could keep your costs down to $2000 a year for setting up your fund and then running it, your MER – management expense ratio – would be around 0.5 per cent.

Of course your expenses could be pushed up by some services from a stockbroker and it could mean you even take on some other assistance such as an adviser or accountant. But you do have to be careful, as when you build up your costs of running your fund, you should compare these to the costs of good industry funds, which can be quite low while their returns have been good to great.

In your case, even if you paid $3000 for an adviser’s help to create your investment strategy, that would only push up your MER to 1.25 per cent.

That said, you seem to have a fairly sensible approach to investing – holding good companies until they make a profit and “dumping dogs”. It is important to have an investment strategy that is soundly based. I like buying good dividend-paying companies, where the businesses have a great track record of performing and paying dividends, though you do have re-evaluate them from time to time. For example, in the age of the internet, there are some retail businesses which will have a tough time reproducing their great results of the past.

Finally, on the matter of your organisation challenges, I think you could look at an accountant for help there, but be mindful of the costs and the services offered. Also look at administrators who are virtually accounting services that specialize in superannuation. There are some really great services for around $2000 or so which will set up the SMSF, monitor it online, help you re-weight your portfolio, give you 24-hour updates and even do your tax return and auditing. They will even help with an investment strategy. With this type of service you will learn a lot on the job.

By the way, there are cheaper services but they offer less help and so I suggest you compare the relative services. Remember to be wary of false economy. If you are going to be your own fund manager, then some professional help in your corner is a very professional characteristic of winners.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, February 17, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Related articles

Super changes in the Budget

Segregation anxiety – how to split assets

Is your business prepared for MySuper come 1 January?

Is it time to fix now?

Can I access my super without retiring?

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300