We all want to be financially secure, especially in our later life but the question is how to go about it. Working hard your entire life means nothing if you cannot reap the benefits of what you have sowed.
It is important to ensure that your hard-earned cash is invested in a way that can keep you happy and healthy, long after you have retired.
A self-managed super fund (SMSF) can be a worthwhile way to invest in your retirement while you are still working to ensure that your finances are set up in such a way that they will deliver the best returns for you in the long run.
The Pros of a Self-managed Super Fund
Though at times, a self-managed super fund can feel like a high-risk venture, one of the great pros is that you can control how much you invest into it.
For those who are looking to test the waters, starting with smaller investments can feel like a safer way to develop this particular type of investment portfolio.
People that like to feel in control of their financial future can benefit greatly from an SMSF.
With the freedom to choose how your retirement fund is invested, you can take as much or as little risk as you like when it comes to the investments that are made with this money.
For those who are stock market aficionados, a self-managed super fund allows you to invest in those up-and-coming companies that a traditional super fund may deem a little too risky for the masses.
If you are up with the current trends regarding technology, for example, then you can make an informed decision about where the trends are going and decide appropriately going forward.
Not many people recognized the potential of Microsoft in the early 90s or thought that Yahoo or Facebook in the 2000s would have such a huge impact on the world, but the people that did made a fortune based on informed decisions.
The Downside of a Self-managed Super Fund
With the freedom of choosing your own investment strategy, there are also potential downsides that can be experienced.
Choosing your path for investing your retirement funds is not a guaranteed recipe for success and if the wrong choices are made, not having the backing of a major superfund can cost you a sum of money.
Being self-managed, an SMSF requires a more hands-on approach to taking care of your retirement funds.
This avenue of investment is much more involved than the set and forget strategies offered by larger superannuation corporations.
The administration required for an SMSF means that there can be higher fees associated with this investment strategy than you would encounter with a managed super fund and the tax and accounting paperwork can be much more involved, depending on what country you are residing in for tax purposes.
As we have seen recently, sometimes no matter what choice you make, even if it seems like a surefire way to create wealth, a downturn can be experienced due to circumstances beyond your control.
A self-managed super fund is not a get-rich-quick concept and needs to be planned, managed and developed over time.
Though self-managed superfunds have proven to be extremely successful in the past for many people, there are no guarantees when it comes to taking risks on investment strategies.