There are many things to consider when setting up an SMSF to ensure better fund management. In particular, you need to think about SMSF setup costs, selection of trustees, the benefits to gain, and the risks involved.
A professional service can help you manage your SMSF properly. For example, they can provide you with a dashboard that brings together everything you need for SMSF management. The service can also help you stay informed of the things you need to do and when these things should be accomplished.
Benefits vs. Risks
In most cases, SMSF investments yield impressive returns, but proper management also requires keeping in mind the risks involved. You want to use your fund to boost your financial growth, but you also want to be careful using your money in risky investments.
SMSFs are licensed financial products. That means only people with certain qualifications are legally qualified to recommend these products to you.
All investment decisions must be cost-effective. If having an SMSF cannot guarantee a high return and also make you spend a lot of money to manage and maintain, it may not be the best way to protect your hard-earned money and your future.
Do you have the time and expertise to manage an SMSF? The day-to-day tasks related to an SMSF include administration, selection of investments, and tax management.
Setting up an SMSF allows for the inclusion of up to 4 members. Sharing your investment with other people comes with its batch of risks. Everyone is responsible to carry on the Superfund and should be ready for any eventualities that might force your team to end the fund – things like the death of a member, a breakdown in the relationship among members, and bankruptcy.
Set Up Investment Strategies
Under this category, you would want to put in place strategies that take into account the ff:
- Objectives of the fund – Examples include retirement needs of members, an appropriate mixture of different types of investment, maximizing tax exemptions, etc.
- Life insurance – Will there be insurance coverage such as life insurance for members?
- Risk tolerance – How much volatility are members willing to take on?
Using LRBA (Limited Recourse Borrowing Arrangement) The ultimate difference that SMSF brings to the table is its ability to borrow money for investments. Because of the availability of LRBA arrangements, an SMSF can borrow money from a third-party lender for single-asset purchases.