Having a future-proof investment strategy is not only legally compulsory, but also one of the best ways to enhance retirement savings. Amid volatile markets, how can self-managed super funds get the right settings in place?
Recent market volatility suggests a review of investment strategy is advisable, particularly ahead of the approaching new financial year. The Australian Taxation Office says the strategy must be reviewed at least annually, and when “significant events” occur including a market correction.
The strategy should be in writing and must be tailored to the specific circumstances of each fund, “rather than a document which just repeats the words in the legislation,” the ATO says. Relevant circumstances include member ages, employment and retirement goals, including risk appetite, with the strategy required to explain how investments meet each member’s objectives.
What to keep in mind
Key factors to consider include:- Risks and likely returns from the fund’s investments regarding its objectives and cash flow needs
- Composition of the fund’s investments, including the extent of diversification
- Liquidity of the fund’s assets
- The fund’s ability to pay benefits when members retire, as well as other costs
- Insurance cover for members—while not essential, it must be considered.
- Australian equities (10 to 25 per cent)
- property (5 to 10 per cent)
- and international equities (10 to 25 per cent)
- domestic fixed interest (15 to 25 per cent)
- international fixed interest (15 to 25 per cent)
- and cash (3 to 10 per cent)