It is essential to understand what an SMSF stands for to determine whether it’s worthwhile setting up one. An SMSF is an acronym for Self-Managed Super Fund. It is an investment fund where the individual investor takes charge of the investment, including deciding how much to put into the fund every month and what financial instruments to invest in. The popularity of SMSF is driven by the feeling of more investors that they can beat the ROI of conventional managed funds.
Besides, there are SMSF investment options that are more convenient to SMSF investors. Unlike conventional funds, where there are minimum requirements on how much one can put into the fund, you are the one who decides how much to put into an SMSF. But even as Self-Managed Super Funds grow in popularity, one must ask themselves, are these funds worth it?
The answer to that is YES. Self-Managed funds are worth it. Here are some of the advantages of having such a fund.
Fast decision making
To make the most when investing, how fast you make decisions matters. The quicker you adjust your portfolio to reflect emerging realities, the better for you overall. However, this is usually not possible with traditional managed funds with multiple people making decisions. Conventional funds are also bound by stringent laws and regulations. When you manage your funds yourself, these are problems you will never have to deal with, hence a higher ROI over time.
Access to a broader pool of investments
Traditional Managed Funds are limited in where they can invest their money. That’s because any excessive risks can lead to conflicts with regulators and lawsuits from investors in case of loss. This is not the case with SMSFs though. With self-managed funds, you can put your money wherever you wish. This is advantageous because it opens up the opportunity to buy into new asset classes that may have risks and a high potential for exponential gains. For instance, while a traditional fund may find it hard to invest in crypto, a self-managed fund can do so and reap the benefits of this highly volatile market.
There is more accountability
When working with a traditionally managed fund, you have very little knowledge of where your money is invested. For instance, if you strongly believe in the need to fight climate change, you can use an SMSF to invest in companies that are into reliable energy. You can’t do this with a traditional fund, where you have very little control over where your money is.
Besides transparency on where your money is invested, when you are managing your funds, you have up-to-date information on how your investments are doing and then act accordingly. This is not something you can do with a traditional fund where an external player is fully in charge of the portfolio and only gives you information after a specified period.
You are fully protected from creditors
Besides all the above advantages, with Self-Managed Super Funds, you get to enjoy protection from creditors just like a traditional fund. This means you get to invest in what you want, when you want, getting the returns you determine yourself, all this while having your retirement savings shielded from any debt obligations that can ruin your life if debtors come calling. It’s one of the big reasons why many people are increasingly turning to SMSFs to manage their long-term investments.
From the above, it is clear that Self-Managed Super Funds are worth it. What makes it even more worthwhile is that there are many online tools available that can help you increase your odds of success when allocating your resources. This means you enjoy all the returns without someone else taking a cut of your returns in fees.