THE BIG OPPORTUNITY THAT CAN POWER YOUR SMSF
A comfortable retirement home, funds to fuel your wanderlust and sufficient cash reserve to take on any unplanned or unanticipated expenditure would be the dream retirement. Wouldn’t it?
Now, there’s no denying the fact that Aussies love travelling. Be it within the Australian backyard or circling around the globe, they just can’t have enough. Can they?
With most of your younger years spent in slogging and saving up for a dream retirement, ideally it would be sensible to have investments to cover for the years after hanging your hat.
“How much thought have you put into your retirement plans?”
Perhaps you already own a sliver of a slice in the big Aussie pie (600,000 self-managed super funds). Well, there’s room for more, and maybe it’s time to look for other investment avenues.
A fair number of super funds season their portfolio by investing in both domestic and international markets. It’s a known fact that the dominating cards in the Australian Stock Exchange (ASX) are held by the Financial sector and Mining sector adding up to a thumping 60% of the total tally. It’s also interesting to note that the ASX accounts for less than 2% of the world’s market value.
With chains of plummets and surges in the news I’m sure at some point you’ve wanted to be part of shares that get talked about almost every day. Shares like Apple, Facebook and Google make a regular appearance in the news and get an elite trust tag that comes with the name. These high-tech stocks don’t get listed in the ASX. Hence, SMSF diversification with international stocks can add new flavors to your package.
Let’s take a quick look at five hacks that can help you empower your SMSF and take you one step closer to that dream retirement plan that you have etched within you.
In addition to increasing exposure to the global performers, SMSF diversification can boost the vital elements of any SMSF tactic. This can act as a shock absorber to an extent as it spreads out the risk.
Self-managed funds are encouraged in considering SMSF diversification. Investing in overseas markets will also provide a wider range of choices to choose from. The degree of diversification can be left to the individual’s preference and discretion. A head start would be diversifying across the top 100 shares in the chosen international market.
If you’re superintending your own SMSF, there are ideally three ways of branching out into the international share market. The first method is pretty much straightforward – direct investment through either a bank, broker or online trading platform. Second – through a managed fund: this involves the pooling of your money with that of other investors and is managed on your behalf. And finally, the third is through exchange-traded funds(ETFs) – these are funds that are listed in a stock exchange that keep a tab on the returns of a particular market sector.
Holding the reins of your own retirement savings can lead to several external dependencies that need to be closely monitored. It would be a primary mandate to stay abreast and up to date with the changes that evolve around the market milieu and superannuation legislation. For instance, changes like those of the $1.6 million transfer balance cap in 2017 and the downsizer scheme effective from 1st July 2018 could pose opportunities and threats. Managing your own funds would give you the full discretionary choice of whether to act or not under such circumstances. Regardless of your call, it is obligatory to stay informed.
Staying on top events and proceedings that send tremors of impact along the stock exchanges is prerequisite, especially when managing your own funds. Sources like, newspapers, websites, e-newsletters and media outlets offer both paid and free content to help you along this road. But then again, “easier said than done”. Picking a few reputable stocks and reviewing them regularly would be an ideal way to avoid becoming overwhelmed. Having an accountant, SMSF administrator or financial adviser can also make your life easier with these aspects.
One of the perks of managing an SMSF fund is the carte blanche authority you have over managing your super. Expenses like audit fees and regulatory fees that roll up into compliance standards are always worth investing in. But other fees like those impose on investment products that have variations between providers may not necessarily always be of value. So, it would be ideal to nitpick what you pay for and a keep a close eye on your cost-radar.
Diversification of SMSF, also like all financial investments hosts possible risks factors alongside the RoI.
Owing to the size, global markets tend to be more mercurial than smaller markets. So, in essence, the New York Stock Exchange will be subject to more swings and crashes compared to the Australian Stock Exchange.
The time difference would also mean that you’d not only be paying for your shares with money but with also your sleep.
Currency fluctuations can also send shudders through your investment portfolio. Any appreciation in the Aussie dollar will reflect badly on your returns. However, if it’s the other way around your returns will tell a better story.
Another critical point to ponder upon would be tax implications involved in buying international shares. The dividends earned may be subject tax deductions. Double taxation is also a concern when it comes to certain countries. But the good news here is that Australia has tax treaties with over 40 countries, and that’s a wide platter to choose from including giants like US, UK and Japan.
However, it is always wise to seek financial advice before you start investing. An expert’s opinion would lend a better sense of clarity.
Velan boasts of over a decade of impeccable track record delivering financial services worldwide. One of its primary offerings is Self Manages Super Fund Accounting and Taxation services to Chartered Accountants and SMSF administrators in Australia.
Equipped with certified processed in place, we deliver quality services with swift TAT. With our built-in redundancy for all critical resources we guarantee uninterrupted service round the clock. Our experienced accountants and structured training programs are astute in quickly adapting to guideline changes.
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