There are many reasons why someone would want to manage their own superannuation fund or SMSF, but the two most popular are that they can have much more control and that they choose what to invest in. In Australia, self-managed superannuation funds account for just over six hundred billion dollars and around twenty five percent of that is in cash and term deposits. This seems to be a little more investment in cash and term deposits when you look at the huge choice of other investments available to us and by doing this, people are missing out on other opportunities. Here are some tips to ensure that you’re using your cash properly in preparation for your retirement.
Being Safe Costs Money.
- Fair enough, cash accounts seem safe, but your account performs at the whim of the interest rate offered. Something to think about would be to consider multiple accounts. One account pays all your bills and then the other is where you really invest your money. You could look at a term deposit account, thus accruing more interest or an online account which generally gives you better interest rates. Because it’s an online account then it allows you to be able to withdraw or send money to the account that pays your bills.
The Last Minute.
- As Australians, most of us are very relaxed and so when it comes to doing something, it’s always ‘I’ll get round to it some other time.’ Many of us wait until the last minute to stick additional contributions into our superannuation and in that hurry, we forget how we are going to invest that money in order to get the best return.
Asset Mix And Risk.
- For those of you that are getting really close to your retirement, you tend to take the safe option as you don’t want to be taking risks this close to putting your feet up. It’s natural to be cautious and opt for cash and term deposits to protect yourself, but you may be missing out on big rises in the market that will allow you to retire with a larger amount. Therefore, you need to think about two things. What kind of asset mix is best for you and what risk are you willing to take?
Investment Platforms.
- Think about using an investment platform for your self managed superannuation funds, as it may provide you with the option of auto investment. This means that any new money invested is invested with your general investment profile in mind. An investment platform will ensure that dividends and returns on your existing investments are paid out. Also think about dollar cost averaging to lower the risk of misjudged market timings.
Budget.
- Make sure you have a budget so you know what’s happening to your cash and then you can manage it much better. By having a budget, you understand a little clearer about how much money you feel you need to keep in cash.
Your own self managed superannuation fund is a great way to invest, self manage and build your nest egg for the day that you will finally retire. However, it is important to understand that this is a lot of responsibility, so always leave yourself open to advice.