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Three quick Q&As for your SMSF

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Last week I covered just three benefits of an SMSF (though that list could grow as big as your nest egg!). This week I want to answer three quick questions commonly asked by those interested in, or currently managing, an SMSF.

Of course, if you’re interested in DIY super or getting the most from your current SMSF, I’ll be covering the subject in more depth this Friday at the Trading & Investing Expo. I’d love to see you there so we can work on your SMSF’s strength together.

How do I know an SMSF is the right fit for me?

It’s important you tick all the boxes to be your own super boss.

Let’s do a profile of someone who might be a good home-based fund manager.

  • You should be organised and great at attending to jobs without fail.
  • You have to be a rule keeper and willing to read about how you become a successful fund manager.
  • You’ll need to immerse yourself in market and money news and tips. You should be reading this column, or at least ones like it.

How much do I need to make an SMSF worthwhile?

Some people start with a smaller amount but ASIC thinks the costs of an SMSF means you should have $200,000 to kick off.

Set up costs using an accountant will be around $1000 and you could pay $1500 a year to meet official obligations. If you’re thinking about going DIY, talk to an accountant to get an idea of your payments to him/her and others.

You will also have payments to stockbrokers if you buy shares, and it’s likely that you will. If you use a full service broker, the payment could be one per cent, and on $200,000, that would be $2000. On $500,000, it would be $5000.

How should I invest?

The beauty of the SMSF is you invest your money how you want.

Your fund has to have a stated investment strategy, which should be linked to the retirement goals of the members. This should outline how the money in the fund will be allocated between acceptable assets. For example, the SMSF’s members might agree to have:

  • 70 per cent of the funds in Australian shares
  • 20 per cent in fixed interest securities and
  • 10 per cent in cash.

This would be an aggressive fund programmed for growth. More conservative ones might have 40 per cent in shares and 50 per cent in fixed interest securities and 10 per cent in cash. Property can also be an asset you can hold in your fund and this can come via a direct holding or through property investment trusts.

I hope I’ve answered some of your questions. However, I’m only paddling in the kiddie pool of the SMSF topic at the moment. Take a dive into the deep-end and come see me in Sydney on 5 August. I promise flotation devices will be provided.

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: Tuesday, August 02, 2011

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.

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