SMSF in focus

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How to Set Up an SMSF

If you have decided to take control of your super fund, an SMSF portfolio can help you direct your investments towards property. In terms of reliability, property is more likely to accumulate in value, and is less likely to experience declines in value due to economic down turns. SMSF’s are naturally complex, which means knowing how to set up an SMSF is essential.

     1. Decide Whether an SMSF is Right For You

While setting up an SMSF comes with reliability, you still need to diversify your investments to make sure they work well for you. If your super fund is small, entering into an SMSF agreement may not leave you with enough cash to diversify. If you are having trouble determining whether you have enough funds to remain diverse, seek professional advice.

     2. Determine How to Manage Your Fund

Do you want one trustee? Do you want multiple trustees? Do you want a corporate trustee? Figuring out the management complexities of an SMSF is often time consuming. In order to make sure the management matches your needs, you need to invest careful time and thought into appointing a trustee. You also need to determine how likely it is that the trustees can work together. This all needs to be worked out alongside the returns you want to see, which you can roughly calculate in advance.

     3. Create the SMSF Trust Agreement

The Trust agreement, or deed, is the most important document you will create when establishing your SMSF. This legally binding document sets out the terms of the trust. If you get it wrong, it can impact loan agreements, property purchases, and may incur taxation penalties from the government. This is less likely to happen when you seek the guidance of a professional. With the legally binding document complete, you can set up the fund and begin investing.

     4. Invest Wisely

Before you begin investing, you need to create an investment strategy. Think of this like a small business plan. You need to forecast, conservatively, how far your investment can take you financially. Set goals for your investment, and factor in potential cash flow issues to avoid future hiccups along the way. Understandably, this is challenging for someone with minimal financial knowledge. As such, you should seek the guidance of a professional to make the process easier.

     5. Keep Your Investment Secure

While you may have grand visions for the future, things can go wrong with any investment. Keep yours secure by choosing an appropriate insurance plan—this can protect you against income loss, which prevents you from meeting your investment’s payment terms. Use a quality team to help manage your investment portfolio, which helps you make the best choices.

While these steps act as a rough guide, there is a need to dig deeper into the process to make your superannuation property a success. Using a professional service, you can smooth out hiccups and invest your super wisely.

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