SMSF – Some Points To Consider While Setting Up Your SMSF
SMSF
is the solution to taking control of the reins of your superannuation funds
from the managed fund’s fund manager. Employers make their contributions, as
part of the superannuation fund, by default to a super fund of their choice.
You controlling this fund are not a possibility unless you set up your SMSF or
self managed superannuation fund.
Though, you would not be able to benefit from the returns of
making investments from this fund, until you have reached the age of
retirement, you could be rest assured that you would have a huge balance to
depend upon when old age sets in. Superannuation contributions by the employer
to the employees were made mandatory to serve this very purpose; savings for
the employee’s nest egg.
Since it is your nest egg you are dealing with, the
investments you make post to your setting up your SMSF should be well researched. You could not leave investments to
chance. Making investment decisions is not a game of darts where you would hit
the bull’s eye at random and as a matter of chance, than skill.
Some of the things you would like to ponder over prior to
setting up your SMSF would be are: whether you have the benefit of time in your
favor. If you are employed full time and have very little time for taking care
of you other activities, would it leave you with ample time for taking
investment decisions? Whether you have the requisite knowledge and experience
to understand the financial markets and hence take the right investment
decisions.
If the above questions do not have a definite answer then it
is best to keep aside the plans to setting up your SMSF for the time being.
When you do not have an investment strategy to base your investment decisions
upon, you would be as good as throwing away your hard earned money when you
make investments undecided.
Managed funds are taken care of by fund managers who possess
a great deal of experience, expertise and knowledge about the functioning of
the financial industry. The huge fees they request of you are to substantiate
their learning and experience, and hence the investment decisions they made on
your behalf. While you set up your SMSF you too should have a similar
experience they possess and should have gone through a similar learning curve
the fund managers went through.
Markets need to be constantly monitored for changes and
these changes need to be interpreted. Decisions may need to be arrived at
instantaneously and corrective procedures need to be taken either favoring the
changes or against the changes. You could make sense of the data only when you
have the requisite knowledge backing you. It is best advised that you spend a
good deal of time in preparation for the huge task you intend to shoulder, and
only when you are really confident, that you should venture into setting up
your SMSF.
Further there are various rules and regulations on the basis
of which the SMSF needs to be operated. Violation of those rules could give
rise to grave problems. Misuse of funds either deliberately or due to ignorance
would attract penalties of 45% of the total fund value. Hence support of the
requisite professionals should be sought for prior to making any investments
etc. through the SMSF.
