I look at my SMSF and try to relate it to what ppl have been saying in here and think "jeez, am I missing something?"
1. the cost of an SMSF is nothing like what it costs for an industry fund. Firstly, the Management Expense Ratio (MER) is extremely opaque and likely does not include the cost of asset churning. Most funds don't give you a choice whether you pay for life insurance or not. There are many other areas where costs are "invisible" in a commercial fund - I was a director of a major industry super fund and was disgusted with what was told to the punters and what was hidden (eg, "not for profit industry funds have no management fees" - absolute bunkum. They use external managers that, because they are "in", charge up to 8% in fees!).
2. anyone contemplating an SMSF obviously believe, like I did, that they can do better, or the losses made through learning are nothing like the losses you make in a commercial fund. So far that has proved to be correct, and I am not a stock picking star.
3. sure there is paperwork. If you haven't the time, don't contemplate it, but its a bit of an overstatement that the paperwork will bury you. I spend about 1 hour on Sat morning making sure its all ship shape - including memos to myself and my wife (fellow trustee) on investment strategies, outcomes, advices, etc.
4. SMSF structure is something that needs to be well thought through, but that simply means talking to an accountant/legal firm that has drawn up lots of trusts before.
5. yes, as city1866 says, there are investments that make it difficult for SMSFs. Simple: don't invest - its not like there is a scarcity of investments out there! I actually LIKE to read the prospectus and fill out the forms - because ITS FOR ME. If you are like city1866, don't start an SMSF. If you want to control your own future, and are happy learning a valuable skill, then it may be for you.
6. Everything can change when and if you want to. If your fund is set up wrongly - easy, startup another one, transfer the assets (sometimes a pain), and cancel the first one. Yes, it costs money, but in the scheme of things nothing like you pay annually to commercial funds. Get it right the first time is the aim, getting it wrong is not a disaster!
7. Note on minimum funds needed: the super industry tries to scare ppl off starting an SMSF by saying you need a huge amount to justify the MER. Sounds right. But is it? On published MERs it is right, but as noted above, the "official "MER" is nothing like the money you are paying in a commercial fund. I started my fund on $80k when the wisdom was you needed at least $150k. My fund has grown consistently since, in most years beating the published fund growth rates. I've never looked back.
8. Complexity: I guess it is if you think selling your own house, applying for your own RECs, or doing your own tax return is too much. Stay in a commercial fund if that is you. Otherwise there are many many books out there that can lead you by the nose to get the gist.
9. the most important bit: I know exactly what the income of my SMSF is, way before I retire. I know exactly where I need to get it to for the lifestyle I want, and control the investment mix to achieve that. I can see the day to day, week to week, month to month volatility and know what I must do to mitigate against that. Compare that to a commercial fund: you retire only knowing a total value and you MUST make a decision as to whether you want a lump sum, an annuity, or invest in a portfolio. You have no idea how much regular income your super can generate, other than whats told to you by advisors when you retire. Your entire retirement will hinge on a relatively uninformed decision you make at a fairly vulnerable time in your life. No thanks!
sorry, long winded, but it gets my goat when ppl think their opinion applies to everyone.
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