Why set up your own Self Managed Super Fund?
Industry funds dismal long term (lack of) Performance
Industry Funds results from 1996 to 2010 : corporate funds on average provided returns of 5.84% pa;industry funds 5.35% pa;public sector funds 6.30% pa; and retail funds 3.66% pa. “Ask yourself how does this help you create sufficient retirement income?”
More than 150 of the growth funds tracked by Morningstar have not earned more than 3.5 per cent a year — or 1 per cent above inflation — over the past decade. These funds contain about $16 billion of workers’ retirement savings.
Thirty-three funds have delivered average investment returns of 5 per cent or more for the past 10 years, including some of the biggest funds.
In your industry fund, not only are you achieving dismal long term performance results on your own retirement funds but if you have $125,000 in your current super, ONLY this $125k is working for you!
Wouldn’t you prefer to take advantage of the power of Leverage; whereby you invest say only 20% of the value of the property and have the bank and a tenant fund 80% of the investment meaning you now have an Asset of over $500,000 working for you in your own SMSF and you only invested around $100k for the privilege
Compounding Returns on Investment
Compounding Returns comprise of Interest being earned on top of Interest for the life of the investment; the longer one invests this higher a compounded return will be … we agree
Based on the above returns of 5% pa, such an account would have grown to $140,000 today (after-fees investment return) but if the return was 3 per cent, the balance would only be $121,000
What if you set up a SMSF and secured a prudent investment property which generated a return on investment of 10%pa; can you imagine the returns on your investment at a regular 10%pa versus industry averages of a dismal 5% pa?!?
How will a 10% compounded over 10 years or more positively effect your retirement lifestyle?
*This is not rocket science nor financial planning advice; merely using Logic and industry statistics
Read more here on the power of compounding returns on investment and the power of leverage, using the banks money to grow prosperity in your super fund
Take Back Control of your Super
A SMSF will give you total control of your Super destiny, you now have your own Choice of a wide range of investment strategy
Include up to 4 members in your SMSF thus being able to consolidate other members super monies under one roof
Manage your own SMSF and save on unnecessary fees being charged by fund managers
Use the power of Leverage, borrow from the bank to leverage into a larger Asset
Take advantage of Compounding Growth through leverage, i.e. ability to invest only $100k and borrow $350,000 to acquire an asset of $450,000 off which you are achieving capital growth (not on the $100k but on the total $450k!)
Why are other SMSF trustees diversifying their investment strategy in their SMSF by securing Property
Stock markets have proven themselves to be highly volatile.What with the recent GFC and the panic it caused to most people who are saving towards their retirement. Our memories are long, and it is the unforeseen reasons such as we recently went through, that one needs to diversify their investment portfolio. As the saying goes “To not have all our eggs in the same basket!”
You may be aware that it is now possible (and practical) to own Investment Property in one’s Self Managed Super Fund.
If you manage your own SMSF you will open yourself to choice of asset class you could invest in, this will also put control of your investment strategy into your own hands where there is sufficient data available to estimate the outcome at time of retirement
Your financial planner /accountant can provide you with the rules and regulations that support this Investment Strategy and it is advisable to have this discussion as to the ‘How’ of owning Investment Property in your Super Fund.
With the how in hand, we should then sit down and brainstorm the ‘Why’ and the ‘decision’ as to if you should or should not add Investment Property into your Retirement Strategy … we are not Financial Planners and do not provide financial planning advice
Another source of information will be from your mortgage broker who is able to demonstrate how to best finance this Investment. Have a chat with yours or if you do not have one we can gladly introduce you to a professional group of mortgage brokers.
Unfortunately we are restricted in giving advice on Self Managed Super Funds but on the other hand you are very fortunate because we can provide you with a selection of Investment Properties that will meet with your own investment strategy requirements that you share with us.
From the selection of ‘best fit properties’ and supporting market information provided, all you have to do is Implement your Investment Strategy by making an informed decision; secure the property you have chosen and allow the property to grow in Capital Value and use the the Rental Income and possibly SMSF contributions to fund the Loan where a loan is taken out.
Are you relying on the ‘expertise’ of a fund manager to manage your retirement funds … ??
A well known fact is that many superannuation funds suffered capital losses during 2007/2008, and 2008/2009. Some of them lost as much as 40% and sent many prospective retirees into PANIC!
At the very same time, property grew in capital value and in rental yield!!!
“Where would you have rather had your money invested??” Discuss this with your Financial Planner and if you agree that Property is the way to proceed we will have the discussion on ‘where, what, when, budget etc’. Our expertise lies in providing you with a wide choice of property to suit your investment strategy, Australia wide.
The advantage of managing your own SMSF is that you / the trustees set the investment strategy of the fund. By doing this in conjunction with your Financial Planner / qualified Accountant you give SMSF a wider range of asset classes to invest in.
Managing your fund as the Trustee, you are not paying big charges / fees to have the fund managed by professional fund managers. You might need help from your chartered accountant, but you won’t be paying a percentage of your capital to a fund manager each and every year. This could positively affect the outcome of your own Super at the time of retirement … how does that Industry Super advert go comparing one Super Fund to their where the fund they are comparing has higher fees meaning the one with lower fees has a better retirement value.
The Australian Tax Office maintains a website which is a mine of useful information on the subject of establishing and maintaining a self-managed superannuation fund (SMSF). Or you can speak to a qualified accountant or financial planner to help you set up the SMSF and provide you with a Statement of Advice, being the ‘guidelines / strategy’ of how your SMSF will invest and projected outcomes.
We invite your questions and encourage you to join our ‘monthly investment property update’ completing the form below :
Comments or questions are welcome.
NB : We are not providing Financial Advice and we are not Financial Planners; we do however work with Licenced Financial Planners who provide Financial Advice and Statements of Advice under their license. Or bring your Statement of Advice with you and we will work within those guidelines.
What we are able to do is demonstrate to you cash flow and the projected return on your investment property in the SMSF based on the numbers you provide to us. You are then advised to take these numbers to a licensed Financial Planner to have them verified; as our calculator only provides estimates based on the Financial Numbers you share with us.
This calculator is designed to enable you to compare the financial outcomes of different properties against each other and finalise your decision based on how you interpret these numbers and which property you thus perceive will provide you with a better return on your investment based on : fundamentals underpinning the property, the location, rental yield, purchase price, management fees, insurance, rates, depreciation etc.
In no way is this financial planning advice – it is a strategy of understanding which property could give you a better return on your investment compared to the financials of another property you are also considering