Given the poor returns from most super funds over the past year, several people recently had shown an interest in setting up self-managed super funds (SMSF). Most of the questions we get are about fund management and spending, such as: How much does it cost to get started, what type of balance should you start with, etc. While this is a valid question, it is not the main question to ask when considering starting your own SMSF or not.
For me, the most important question is, “Can we get a better return on my SMSF than the industry’s most efficient super fund?” Many people especially those who offer self-managed super funds service in Werribee tend to focus on the fees charged by super wills. While fees and management fees affect refunds, high fees aren’t always bad if you can get a higher return.
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If your fund manager charges a 2% fee but can make a 12% return per year, you will still make a net profit after charging the 10% fee. This is much better than having a fund manager who charges a 0.5% fee but can only make a 5% return because your net profit is only 4.5% versus 10%.
When you have SMSF, you really become the fund manager of your own fund. This is a huge responsibility and can be very daunting, especially if you already have some experience investing. While it is easy to overthrow fund managers who lost money in the recent downturn.
Before you start using SMSF, you need to have a plan on how to make money from your funds which you think can beat the most effective super funds. There are not many free resources out there that can help you with a suitable investment strategy for SMSF.