www.esuperfund.com.au

Questions & Answers - Investments Overview


+ What Investments are Allowed under the ESUPERFUND Platform?

Listed below are Investments allowed under the ESUPERFUND Platform:

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    Cash
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    Online Savings Accounts
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    Term Deposits
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    Australian Shares
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    International Shares
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    ETFs
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    Residential Property (with Borrowing)
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    Residential Property (No Borrowing)
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    Commercial Property (with Borrowing)
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    Commercial Property (No Borrowing)
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    Managed Funds
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    Metals
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    Unlisted Bonds
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    Listed Bonds
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    CFDs
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    Options
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    Warrants
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    Forex
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    IPOs
+ What Investments are Disallowed under the ESUPERFUND Platform?

Listed below are Investments Disallowed under the ESUPERFUND Platform:

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    Private Companies and Trusts
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    Overseas Property
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    Loans to any Person or Entity
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    WRAP Accounts & Separately Managed Accounts
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    Collectables and Personal Use Assets
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    Crypto-Currencies (e.g. Bitcoins)
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    Carrying on a Business
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    Investments not listed as Allowable Investments
+ What is an Investment Strategy?

Prior to Investing your Super Benefit, it is a requirement under current Super Law that a SMSF formulate and give effect to an investment Strategy. An Investment Strategy is simply a plan for making, holding and realising SMSF Investments that reflects the SMSF's Objectives (eg increasing the value of Member Benefits). In establishing an Investment Strategy the following steps should be taken into account.

Step 1: Develop Investment Objectives.
Step 2: Develop a Strategy to achieve the Investment Objectives
Step 3: Monitor the Objective and Strategy with a periodic Investment Review

Most clients establishing a SMSF assume that an Investment Strategy is a Financial Plan for their SMSF and proceed to draft a document that details the specific Investments they want to make for the SMSF. For example clients when drafting their Investment Strategy will provide specific details of the assets they wish to acquire (eg shares or cash) and the respective percentage allocation to each asset class. This is NOT an Investment Strategy required under current Super Laws, but a Financial Plan. This level of detail in NOT required when formulating your SMSF Investment Strategy. More about the Investment Strategy can be found here.

+ Does ESUPERFUND provide me with a Standard Investment Strategy?

Yes. When you establish a SMSF with ESUPERFUND we will provide an example of an Investment Strategy for your SMSF. You may adopt the standard Investment Strategy for your SMSF or modify it as you deem necessary. The Standard Investment Strategy is very flexible and in no way restrictive. It does not specify percentage investment ranges and gives you the flexibility in designing and implementing your SMSF Investments as you deem appropriate as the SMSF Trustee.

+ Do I have to diversify my Investments?

No. It is important to understand that the SMSF Investment Strategy does not need to specify the percentage or percentage range that will be invested in each asset class. Each asset class should be considered on its own investment merits having regard to an appropriate degree of diversification. Many SMSF Trustees will dictate the percentage or the percentage range their SMSF will invest in each asset class. For example they may specify that 60% of monies will be invested in Shares and 40% in Term Deposits. This is unnecessary and not recommended. Individual circumstances change and you should not restrict your SMSF to having to invest a certain percentage in a certain asset class or even worse cap the percentage that can be invested in a particular asset class. In the 2008 Global Financial Crisis, it may have been appropriate to switch all monies into Government Guaranteed cash investments. A restrictive Investment Strategy would not have allowed this. Whilst there is no specific prohibition to investing 100% of your Super Benefit in one asset class as detailed above, where such a strategy is adopted, it is important to remember that risk and diversification are important considerations when implementing your SMSF's Investment Strategy. A "one asset" strategy may be considered as increasing your SMSFs Risk Profile and may not be adequately diversified to mitigate Investment Risk. So while this strategy is not specifically prohibited you must carefully detail why it is appropriate for your SMSF if it is adopted

+ Can I invest in a Single Asset?

Yes. A SMSF can invest 100% of monies entirely in one Asset Class (eg Property) or one Asset (eg BHP Shares). However the investment must conform with the SMSF Investment Strategy. Most importantly, you must prepare an Investment Minute detailing the reason for the investment and how it conforms to the SMSF Investment Strategy. For example many clients invest 100% of Super Benefit in Gold for capital appreciation and to maintain the purchasing power of their investments in an accelerating inflation and currency environment. Similarly some clients invest all SMSF monies in one property for capital appreciation and a solid rental yield. Both strategies are acceptable but you must prepare an Investment Minute detailing the rationale for the investments and how they conform with the SMSF Investment Strategy. Always! A Standard Investment Minute can be found here.

+ Do I have to undertake an Annual Investment Review?

Yes. The SMSF Trustees must review the Investment Strategy of the SMSF annually and at such other times as a significant event occurs which affects the SMSF. This does NOT mean that each individual Investment must be reviewed. Individual Investments can be overseen on a daily basis (i.e. the sharemarket can change rapidly) and changed at any time. The Investment Review relates to reviewing the overall Investment Strategy of the SMSF. For example the SMSF Trustee may decide over time to change the SMSF asset allocation when moving from working to retirement, or the methodology when choosing an Investment. We recommend a minute be prepared detailing the results of the Annual Investment Review of the SMSF. In many cases there will be no change to the Investment Strategy and the underlying Investments making up that strategy. In this case a Minute will typically state that there has been no material change in the Investment Strategy or the Investments of the SMSF. Alternatively if there has been a material change in the Investments of the SMSF this should be minuted as part of the Annual Investment Review. For example you may be moving from an aggressive investment theme that invests predominantly in speculative and blue chip shares as you were working and required capital growth to a more capital stable income generating investment theme as you were approaching or had retired.

+ What is the Process to make an Investment for my SMSF?

Detailed below is the Investment Process you should follow when making Investments for your SMSF. The Investment Process should be carefully reviewed and followed to ensure that you adhere to our terms and conditions and more importantly ensure your SMSF complies with all Super Laws.

Step 1: Review Investments Allowed
Step 2: Consider Investment Strategy
Step 3: Make Investments from the Transaction Bank Account
Step 4: Document Investments
Step 5: Document Annual Investment Review

More about the Investment Process can be found here.

+ Does my SMSF have to make all Investments through the Transaction Bank Account?

To simplify the annual compliance process it is preferred that all Investments made by your SMSF are made directly from the Transaction Bank Account. However this is not compulsory and Investments can be made from any of your SMSF Accounts as desired.

+ Does ESUPERFUND provide Investment Advice?

No. ESUPERFUND does not provide Investment advice to clients. Prior to making any investment decision clients should consider the appropriateness of the financial product having regard to their objectives, financial situation and needs. Where applicable they may wish to consult a licensed financial planner.

+ What Minutes are required to be prepared by you as the SMSF Trustee?

As a Trustee you must ensure all investment decisions are made in accordance with the documented Investment Strategy of the SMSF. We recommend that investment decisions are documented detailing how they conform to the Investment Strategy of the SMSF. Documenting Investments does not mean that you document every Investment made the SMSF. Typically investment themes should be documented. For example you may be acquiring blue chip shares for capital growth and tax effective fully franked dividends. In this case, one investment minute should be prepared detailing the rationale for this investment. You should not prepare a separate minute for every blue chip shares purchased. This is unnecessary. Similarly you may invest in several Term Deposits for capital stability and to generate a consistent ongoing yield. Again, in this case one investment minute should be prepared detailing the rationale for this investment. Standard Investment Minutes can be found here.

In addition we recommend a minute be prepared detailing the results of the Annual Investment Review of the SMSF. In many cases there will be no change to the Investment Strategy and the underlying Investments making up that strategy. In this case a Minute will typically state that there has been no material change in the Investment Strategy or the Investments of the SMSF. Alternatively if there has been a material change in the investments of the SMSF this should be minuted as part of the Annual Investment Review. For example you may be moving from an aggressive investment theme that invests predominantly in speculative and blue chip shares as you were working and required capital growth to a more capital stable income generating investment theme as you were approaching or had retired. A Standard Annual Investment Review Minute can be found here.