Is an SMSF an option for a newbie?

[arruga]

Hi all.
If I want to manage my Super fund asset portfolio myself, what's the best way to go ? From what I understand, it's no use bothering with a SMSF until you're over 250Kish, due to the hassle and costs...opinions ? Are all Super funds kind of the same in terms of flexibility when it comes to allow you to manage your stuff ?

 

[lenny]

Re: Is it a SMSF an option for a newby ?

Hi arruga,

Have a read of the below article from the esuper fund website.

The $200,000 SMSF Myth
http://www.esuperfund.com.au/articles/dollar200000myth.aspx

Lenny

 

[So_Cynical]

Are all Super funds kind of the same in terms of flexibility when it comes to allow you to manage your stuff ?

NO not all the same...there are many that are samish but a few that offer you a lot more investment choices.

Colonial first state super gives you the largest investment choice, over 50 options

http://www.colonialfirststate.com.au/producteducation/super/default.aspx?menutabtype=pe

Australian super, ING and a few others allow you to buy shares (trade) in the ASX200/300 and offer over 10 standard investment options.

http://www.australiansuper.com/

http://www.ingdirect.com.au/super_and_retirement/living_super.htm?cid=ps:goo:lsp:spl

 

[Julia]

Hi all.
If I want to manage my Super fund asset portfolio myself, what's the best way to go ? From what I understand, it's no use bothering with a SMSF until you're over 250Kish, due to the hassle and costs...opinions ?

Do not underestimate the responsibility of managing your own Super Fund.
It's up to you to asssess whether it's financially viable.
A very simple calculation will tell you whether the cost of the annual tax return and audit, plus ASIC fees, are (on a % basis) economic in terms of fees.

At least with a SMSF, you're likely to pay your accountant and auditor on the basis of the work involved as distinct from a % of the sum invested which is how I understand some of the public super funds work.
(I stand to be corrected on this, as always.)

With no disrespect intended, judging by your questions in the last few days, it might be better to get a good understanding of investment principles, before you commit to the expense of setting up a SMSF.

 

[oldorman]

I took the plunge with e super fund and all good so far. They handle the yearly BAS statement you just provide them with receipts of your transactions and they compile it all.
The biggest expense so far has been the Life Insurance & Total disability cover, I'll try and find a cheaper alternative next time around.
AS for the Investments well I'm about to begin just resting in cash at the moment.
The whole thing has been quite easy really and I had no experience what so ever.

 

[Pager]

Friend of mine did a few years ago when SMSF first started as he was so fed up with how his industry fund performed, he has no investment knowledge either then or now but his strategy is simple, salary sacrifices the full $25K a year ( or the full $50K for the past few years until this year) and every 6 months take a 12 month term deposit, as they mature he rolls them, he did his sums and reckons this strategy will see him retire with enough super in the 10 years he has left before he can do so even with the current lower rates as I don’t think he’s getting much at the moment on them but he still reckons he’s done a hell of a lot better than had he left his money in the Industry superfund, as to the low rates again what goes around comes around and maybe that will be the case.

His expectations of retirement funds are modest (he wants to retire at 65 with a weekly income of $1000 in today’s equivalent) and maybe goes to show that if you stick by a simple strategy and keep your goal realistic even a very simple strategy such as this will get you there or granted a big part is the fact he’s salary sacrificed nearly half of it each year.

 

[Bill M]

he did his sums and reckons this strategy will see him retire with enough super in the 10 years he has left before he can do so even with the current lower rates as I don’t think he’s getting much at the moment on them but he still reckons he’s done a hell of a lot better than had he left his money in the Industry superfund, as to the low rates again what goes around comes around and maybe that will be the case.

Before he can do what? I don't understand your comment

This is what we need to know.

1. How long is he expecting his super last him in years?

2. What will be the capital base? 300K 500K or $2 Million.

3. Will his income be fixed or will it increase year after year to keep up with inflation

When you find that out let us know and then we can make an informed comment.

 

[sydboy007]

I set myself up with esuperfund a few months ago.

I too had always thought you needed a large balance to make a SMSF worthwhile, but with esuperfund you have a pretty low fixed cost each year - I would estimate the running costs will be < $1100 taking into account buy sell costs on top of the standard fees. That will work out around 0.75% of assets for me, which is quite competitive compared to most super funds.

First year free set up and audit makes the decision a lot easier.

The question is are you willing to spend the time looking after your money? What's your strategy going to be? How much risk will you take on board?

For me I wanted to be able to earn a decent return on cash, be able to pick the fixed interest I wanted, and target higher yielding shares. I'm after dividends more than capital growth - bit like a bird in the hand or 2 in the bush. So far my portfolio is looking to provide me with a grossed yield of 9%. I buy to hold for the long term, so while the companies and interest earning securities and bonds keep performing I wont be jumping from 1 to the other in the hope of timing the market for extra yield that's lost after tax is paid.

I'm all for people taking control of their super. It will be most peoples biggest investment after their private house, and the earlier you take n interest and help it to grow, the better. Just make sure you are really willing to put in the effort to educate yourself. First thing is to make your investment plan. there's plenty of templates out there, but don't just cut and paste. Taylor it to yourself, because if you can create a good investment plan, then you have an understanding of your risk mentality (especially understand how you would feel if your share portfolio saw a 10% drop in a week). I hope to be able to have the Warren Buffet mentlity of buying when others are fearful and selling when others are greedy.

I decided to keep an investment journal. Each investment I make I've notes a few points as to why I made the investment. Every quarter I go through my journal and see if the reasons are still valid. If things have changed significantly and I know have reasons to seel I will, if I still believe the investment will rpovide value over the long term, then I will not let the herd mentality and volatility of the share market affect my decisions - yeah some people will try to surf the momentum and that's a valid strategy, but I'm a bit lazy and don't want to be buying and selling all the time.

I'm also hoping that if the SMSF market keeps on growing that eventually the leaching financial industry and super funds are going to have to move away from a clip the ticket mentality, to providing a true service. I've yet to see a valid explanation as to why someone with 500K in a super fund pays 5 times as much as someone with 100K. With modern computer systems there would be practically no cost difference, and in most industries the more volume you are offering the cheaper unit price you get.

 

[Bill M]

I'm also hoping that if the SMSF market keeps on growing that eventually the leaching financial industry and super funds are going to have to move away from a clip the ticket mentality, to providing a true service. I've yet to see a valid explanation as to why someone with 500K in a super fund pays 5 times as much as someone with 100K. With modern computer systems there would be practically no cost difference, and in most industries the more volume you are offering the cheaper unit price you get.

Exactly right, me neither.

To the OP, there are other ways too as So Cynical has pointed out. Now some Super Managers allow you to do a lot more with your money and you can invest it where you like at no or minimal fees. I was just looking at the ING one, you don't need to do any of the audits or reporting, they handle all that. You can do straight term deposits or cash without fees and do direct stocks that has a yearly fee rather than a percentage fee. Have a look at the fees at this link, I am considering this one too. http://www.ingdirect.com.au/super_and_retirement/living_super/where_are_the_fees.htm

 

[Pager]

Before he can do what? I don't understand your comment

Pretty simple really before he can retire


As to the other questions, I wouldn’t have a clue

All I was really trying to point out is running your own SMSF doesn’t have to be complicated nor do you have to be a financial guru, he’s obviously achieving his goals and even with the current low rates is confident he will meet them, he’s certainly smiling in that he’s performed better than most superfund’s the past 10 years .

 

[Julia]

. I was just looking at the ING one, you don't need to do any of the audits or reporting, they handle all that. You can do straight term deposits or cash without fees

Do they give you the full range of available term deposit and at call rates across all institutions or do you just have to take whatever they choose?

 

[Bill M]

Do they give you the full range of available term deposit and at call rates across all institutions or do you just have to take whatever they choose?

They offer their own (all ING in house) and they look pretty competitive too.