All Self Managed Superannuation Funds (SMSF) must have a valid investment strategy. An investment strategy sets out a fund’s investment objectives and how the members plan to achieve them; we call it a cookbook for your super. It describes the personal circumstances of all the fund members, including their age and risk tolerance and provides a guide as to what the fund can invest in, the weighting between certain investments sectors and other valuable governing rules of an SMSF. An Investment Strategy should be in writing so you can illustrate that your investment choices comply with the strategy, the ATO and superannuation legislation.

When your accountant or adviser is preparing an investment strategy for you, you are also required to consider whether to apply for or maintain insurance cover for each member of your SMSF.

The document itself must be reviewed regularly (at least annually) to ensure it continues to reflect the purpose and circumstances of your fund and the members. It isn’t a requirement to update your investment strategy every year but regular reviews will ensure you maintain an awareness of the SMSF & investment environment and make adjustments accordingly. Of course, you must document all decisions and reviews in the minutes of meetings held.

When preparing an investment strategy, you need to consider:

• diversification (investing in a range of assets and asset classes)
• the risk and likely return from investments, to maximise member returns
• the liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses)
• the fund’s ability to pay benefits (when members retire) and other costs it incurs
• the members’ needs and circumstances (for example, their age and retirement needs)
• whether the trustees of the fund should hold insurance cover for one or more members of the fund.

The ATO has an excellent video guide on their website:

If your fund does not yet have an investment strategy, or you need an update, we can offer a cost effective option to update this. To book an appointment to update your SMSF Investment Strategy, please phone us on (03) 9999 7200 or contact us here

All information provided in this article is of a general nature only and is not personal financial or accounting advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of our information.