Over one million Australians have embraced increased autonomy over retirement funds by opting for a self-managed super fund (SMSF).
An SMSF offers the advantage of diversifying investments across a wider array of asset classes compared to conventional superannuation funds. Prioritising your financial objectives is essential when evaluating investment opportunities. While conservative assets (cash and bonds) offer stable cash flow, growth assets such as property, shares (Australian and global) and commodities contribute to wealth accumulation. Below is an outline of some of the investment options available within a self-managed super fund.
Residential and commercial property
Diversifying investments in residential and commercial properties within an SMSF can strategically enhance long-term returns. Residential properties offer stability and the potential for capital appreciation, generating a consistent income flow through rental yields. Conversely, commercial properties present attractive yields, tax advantages, extended lease periods, and higher return potential.
While lenders typically permit SMSFs to borrow 70-80% of a property’s value, strict adherence to Limited Recourse Borrowing Arrangements (LRBA) regulations is essential. Compliance ensures effective risk management and safeguards the SMSF’s financial well-being in the long run.
Cash and term deposits
Utilising a term deposit or cash account within your superannuation portfolio enables you to allocate a portion of your balance for a set duration at a pre-agreed interest rate. This low-risk strategy ensures a higher interest yield than standard savings accounts, provided the funds remain untouched until maturity. While term deposits offer lucrative returns, maintaining a high-interest savings account remains beneficial for immediate access to funds, ensuring liquidity and flexibility within your investment portfolio.
Physical commodities & Precious Metals
Investing in physical commodities and precious metals can be a valuable addition to your investment portfolio. By allocating funds to tangible assets like real commodities or commodities-backed instruments, you introduce a layer of diversification that can help mitigate risks and enhance overall portfolio resilience. These investments have the potential to act as a hedge against inflation, safeguarding your wealth during economic uncertainties.
Precious metals, such as gold and silver, are commonly regarded as safe-haven assets due to their historical stability and ability to retain value over time. However, integrating physical commodities and precious metals into your SMSF necessitates comprehensive research, a deep understanding of market dynamics, and strict adherence to regulatory frameworks to ensure a well-informed and compliant investment strategy.
Crypto and Other Currency
Diversifying your SMSF through investments in cryptocurrencies and traditional fiat currencies can introduce a dynamic element to your portfolio. Cryptocurrencies such as Bitcoin and Ethereum have emerged as attractive options due to their potential for significant returns despite their inherent volatility. Furthermore, including exposure to various fiat currencies can serve as a hedge against currency-related risks and enhance the overall diversification of your SMSF.
However, delving into digital and conventional currencies within an SMSF demands meticulous attention to regulatory requirements, robust security protocols, and a proactive approach to staying abreast of the rapidly evolving landscape in the financial sector.
Australian and global shares
Expanding the diversification of your SMSF by investing in both Australian and international shares, including Exchange-Traded Funds (ETFs), is a prudent approach for fostering long-term growth. Investing in Australian shares offers insight into local market dynamics and economic fluctuations. On the other hand, international shares provide diversification benefits and exposure to global economic trends, enabling SMSF portfolios to capitalise on international market opportunities while mitigating risks associated with single-market exposure. Whereas industry and retail super funds greatly limit the range of global shares a member can access, SMSFs are virtually unlimited in their reach.
Fixed income products
Fixed Income Securities, also referred to as Interest Rate Securities, encompass debt investments that offer a consistent fixed or variable rate of return. By investing in these securities, you essentially lend funds to the issuer in exchange for periodic interest payments and the commitment to repay the principal amount at a predetermined maturity date. Within the Australian Securities Exchange (ASX), investors can access three primary categories of Fixed Income Securities: Australian Government Bonds, Corporate Bonds, and Hybrid Securities. Each type presents distinct risk and return profiles, catering to diverse investment objectives and risk appetites in the market.
Collectables
Engaging in collectibles as an investment avenue presents a distinctive and unconventional approach to diversifying your portfolio. Assets such as artworks, vintage cars, rare coins, and other high-value items not only offer a tangible presence but also contribute an aesthetic appeal to your investment mix. While these collectibles may hold the potential for capital appreciation, it is essential to proceed cautiously.
SMSFs are subject to stringent regulations concerning investments in collectibles, necessitating meticulous adherence to compliance guidelines. Storage expenses, insurance coverage, and market volatility should be carefully assessed to ensure a well-informed decision-making process when incorporating collectibles into your investment strategy.
In conclusion, exploring diverse investment opportunities, such as collectibles, cryptocurrencies, and traditional currencies, can significantly enrich the investment landscape of your SMSF. By carefully considering the benefits and risks associated with these asset classes and aligning them with your financial goals, you can create a robust and well-rounded portfolio.
To delve deeper into optimising your SMSF investments and navigating the complexities of alternative assets, we invite you to take the next step towards financial empowerment. Book an appointment with us today or attend our upcoming webinar to gain valuable insights and personalised guidance tailored to your unique investment journey. Your financial future awaits – seize the opportunity to enhance your SMSF strategy and unlock new possibilities for long-term success.