As their superannuation grows many Australians are wondering whether they should start their own self managed superannuation fund (SMSF) and “take control” of their finances.
There is no easy answer because running your own fund is not as simple as it sounds. It involves three major jobs - administration (doing the paperwork), investment (deciding where to place the money) and arranging insurance where appropriate.
If you can handle these tasks with ease, you are well on your way, but you also need to take into account the assets the fund will hold. If these are not at least $300,000, the setting up costs and the annual expenses are probably not worth the exercise.
Far too many people start their own fund after a market crash because they think “I could do better myself”. If this is your attitude, you need to ask what is your track record in handling growth assets like property and shares before you take the plunge and decide to forsake the experts and do it yourself.
Having said that, I admit that there are good reasons for having your own SMSF in certain circumstances. These include the ability to hold specific investments such as business property that are not available through a retail fund, or if you enjoy and are successful at trading shares or if you have complex estate planning issues.
Also, the government is less likely to come to your aid if you are a DIY investor. Just last week the Gillard government announced a bailout of $55m for superannuation fund members who invested in the failed Trio Capital. Members of self managed superannuation funds were not allowed to participate on the grounds that trustees of SMSFs “have the benefit of direct control over where their money is invested”. In other words, if you choose to do your own thing don’t expect any help from the government.
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