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By Will Ellis

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Last Updated on February 26, 2024

Edited by Adam Turner

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Fact checked and reviewed

If you’re starting a Self-Managed Superannuation Fund (SMSF), you need to have investment strategies in mind immediately. Your investment strategy plays a huge part in saving effectively for your retirement. You will need to review your investment strategy and not stray from it.

When planning your investment strategy, you must make important investment decisions, like choosing which asset classes to invest in.

In this article, you’ll learn all about SMSF investment strategy and the different assets you can invest in. I’ve compiled a list of assets you could consider for your fund.

Table of Contents:

• The Different Types of SMSF Investments
• Self-Managed Super Fund Investments: Pros and Cons
• Best Self-Managed Super Fund Investment Options: Reviews
• Leading Self-Managed Super Fund Investments: The Verdict
• FAQs

The Different Types of SMSF Investments ➡️

When deciding which investment strategy to explore, you must know what asset classes you can invest in. If you have more than one member in your fund, there can be up to four members; you will need permission from all parties to invest.

You can choose to invest in the following assets:

• Shares: You can invest in both Australian and international shares. Your SMSF can trade shares if this follows your investment strategy. Shares are ideal if your investment strategy is aiming for capital growth.
• Managed Funds: You can invest in managed funds by going directly to the fund manager and purchasing units in a fund or exchanging Exchange Traded Funds (ETFs) through a stockbroker.
• Property: Property investment is also excellent for a capital growth investment strategy. You can invest in both residential and commercial property.
• Overseas investments: You can look further afield for your investments. If your investments meet compliance obligations, you can look for assets overseas.
• Collectables and personal use assets: You can invest in collectables and personal use assets. However, the items can’t be used by SMSF trustee members. For example, if you invest in artwork, it can’t be displayed in your house but can be rented to a corporation or art bank. 
• Bonds: Your SMSF can invest in various bonds like fixed interest rates, domestic bonds issued by the Australian Government or international bonds.
• Term deposits: Some financial institutions offer SMSF term deposits. They’re similar to regular term deposits, except they’re designed specifically for self-managed super funds.
• Cryptocurrency: You can invest in cryptocurrencies like Bitcoin and ETH. These markets can be volatile, so keep a close eye on your investments if you invest in any digital currency.

Self-Managed Super Fund Investments: Pros and Cons ⚖️

Managing your own super fund is a substantial financial commitment. Before I can share your potential investments, you must learn the pros and cons before making any investment decisions.

Pros ✅️

• Retirement benefits: The whole point of an SMSF investment strategy is to raise funds for when you retire. The sooner you start your SMSF and make investments, the more you can make for when you retire. You can pay benefits into your bank account from your fund weekly or monthly for when you retire.
• Complete control of investments: A self-managed fund allows you more control over where the money goes and how much you want to invest, and you can decide how you would like to receive the funds when you retire. You can hire or choose a corporate trustee to oversee your investments, if you or other fund members prefer.
• Investment choice: You can invest in a vast range of asset classes. If you have more knowledge about one than others, you can choose to invest more in that class.
• Flexibility: You’ll be directly managing your fund, so if there is a change in market value or conditions, you can choose to invest or reinvest your funds.

Cons ❌️

• You’ll need financial and legal knowledge: You will know a thing or two about investing and the legal expertise of having a managed super fund. If you start investing without knowing any background on the market or asset class, you could do more damage to your investment than good. Your super fund’s expenses must be recorded and compliant with the Australian Taxation Office rules.
• Time-consuming: It takes time and dedication to start an SMSF. After setting it up, you must dedicate more time to investment research and reviewing your investment strategy annually.
• Fees and ongoing expenses: When you set up a self-managed super fund, there are fees involved, some of which are ongoing. You can expect to pay legal, admin, and maintenance costs.

Best Self-Managed Super Fund Investment Options: Reviews 👀️

Before you commit seriously to investment strategy and put money towards the fund’s assets, always seek personal financial advice to ensure this is the right financial decision for you and other SMSF trustees.

1. Exchange Traded Funds in Australia

ETFs are managed funds you trade on the Australian Securities Exchange (ASX), just like ordinary shares. Most ETFs track a gauge of some sort, like index, sector or commodity, and they’re a great way to gain exposure to an entire market component through one share transaction.

There are 240 ASX-listed ETFs to choose from. Different Australian ETFs include Yield, Broad Exposure, Cash/Bonds, Index Tracking, Bear Market, Sectors, Small Cap and more. ASX lets you look at each category and shows you all available ETFs.

The main benefits of ETFs are that they’re easy to trade, and you can buy them through your existing brokerage account. There is a wide range of markets you can choose to invest in.

2. Exchange Traded Funds Internationally

If you want to look further afield for ETFs, there is a global market you can trade on. You can trade  ETFs worldwide in the US, Europe, Asia, and other markets. You can buy shares and trade energy, agriculture, gold, palladium, silver, and platinum with ASX. There are different ETFs available around the world.

The benefit of trading ETFs on an international market is that you can choose to long or sell assets, and one share purchase can provide exposure to an entire market. The benefits from local ETFs also apply to international ones.

3. Australian Government Bonds: Exchanged-traded Treasury Bonds

Exchange-traded Treasury Bonds (eTBs) are a great way to invest in Australian Government Treasury Bonds. eTBs are easily traded and quite accessible if you’re unfamiliar with bonds. When you hold an ETB, you gain beneficial ownership through Chess Depositary Interests (CDIs). So, you will gain the economic benefits attached to the legal ownership of the Treasury Bonds, including coupon and principal payments.

The Coupon Interest Rate on a Treasury Bond is agreed upon when the bond is first issued and remains fixed for the duration of the fixed term. When a bond yields to maturity, this is the rate of return on the bond if it’s purchased at the current market price and stays the same until the fixed term ends.

ETBs provide fixed interest payments for the life of the investment, payable six monthly. You can buy or sell eTBs on the ASX market.

4. Australian Government Bonds: Treasury Indexed Bonds

Exchange-traded Treasury Indexed Bonds (eTIBs) are similar to treasure bonds, providing an accessible way to invest in Australian Government Treasury Indexed Bonds. When you hold an ETB, you gain beneficial ownership through CDI. Like eTBS,  you will gain the economic benefits attached to the legal ownership of the Treasury Indexed Bonds.

The difference with Treasury Indexed Bonds is that the Australian Government pays regular coupon interest and pays the nominal value at maturity. eTIBs protect against inflation, as payments and the capital value payable at maturity increase in line with changes in the Consumer Price Index(CPI). You earn interest at a fixed rate for the life of the investment, and interest is payable every three months. You can buy and sell eTBs on the ASX market.

5. SMSF Term Deposits

You can invest your funds into term deposits. Term deposits are fixed investments that offer high interest rates. You deposit a large sum at a fixed rate and for a set amount of time. Conditions and interest rates are determined before depositing any money. Term deposits are government-protected and generally offer higher interest rates than savings accounts.

SMSF term deposits are similar to regular term deposits. However, an SMSF term deposit is designed for SMSFs, not individual customers. Only SMSF trustees can apply for an SMSF term deposit. Many financial institutions offer SMSF Term Deposits, such as ING Australia and Canstar.

6. Business Shares

When you buy a share in a company, you’re becoming a part owner of that business. As a shareholder, you’ll have an equity stake in the business, and the investment return will solely depend on the business’s success.

You can invest in different types of shares and holdings to help further your investment strategy. There are two types of shares you can look to invest in:

• Direct domestic shares: You can invest in Australian shares. Over the past 30 years, Australian shares have produced a total average annual compound return of 9.1%. It’s not uncommon for SMSFs to invest in domestic shares.
• Direct global shares: You can invest in different shares around the world. Opening your investment strategy to a global market may give you more choices in assets to invest in.

You can see what shares to invest in on the ASX.

Leading Self-Managed Super Fund Investments: The Verdict 💡️

If more than one class asset grabs your attention, investing in more than one asset class is always a good idea. Diversifying your investments will help you create a more diverse income stream, and if there is a loss in market value with one asset, at least you can rely on the others. Look at ASX and become more familiar with what commodities you could invest in.

Ensure you obtain the relevant product disclosure statement when investing in any asset, or see a financial adviser to oversee your investment strategy for your self-managed super fund.

Frequently Asked Questions 🔎️

What Is the Best Investment for SMSF?

There is no single answer for the best investment for SMSF, as an investment strategy should be diversified with different asset classes to ensure your investments are safe from volatile markets. If you invest in only one type and there is a market crash, you will lose all your funds. However, if you spread your funds across multiple assets, you will still hold most of your investments.

What Are the Drawbacks of SMSF investments?

The drawbacks of using SMSF investing are as follows:

• You will need to know a thing or two about investing, as well as the legal knowledge that goes with having a managed super fund.
• It takes time and dedication to start and run an SMSF
• When you set up a self-managed super fund, there are fees involved, some of which are ongoing.

What Is an SMSF?

An SMSF is a private superannuation fund that you manage yourself. Up to four members can join the fund, and you’re all equally responsible for fund decisions, compliance and super laws. An SMSF investment strategy is based on the current financial needs of each member of the fund.

What Are the Benefits of SMSF investments?

There are several benefits to investing with an SMSF, such as:

• The whole point of an SMSF investment strategy is to raise funds for when you retire. The sooner you start your SMSF and make investments, the more you can make for when you retire.
• A self-managed fund allows you more control over where the money goes and how much you want to invest, and you can decide how you would like to be paid when you retire.
• You can invest in a whole range of asset classes. If you have more knowledge about one than others, you can choose to invest more in that class.

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