The Good, The Bad and The Ugly.
Sitting with Ray Ong in the 98five studio to talk about Self Managed Super Funds and the things to know and consider before deciding if they’re right for you.
If I was 20 and just starting work, should I look into a SMSF?
No, if you’re just starting off you would be best to go with managed super fund. This is because there’s costs involved in managing a SMSF that if you don’t have a lot of money in your super would be outweighed by the management costs. For example audits and the accountant’s fees.
You could look into a SMSF around your mid 30’s depending on how aggressive you have been in regards to adding to your super. Some providers give you the self managed approach at a low cost, you just have to consider if it’s right for your situation.
You’ve talked previously about setting goals when it comes to investing, what are realistic goals and how much time and increase is realistic?
There’s two parts to this answer, what are realistic goals? It comes down to your situation, it’s all relative because the goals for someone earning 100k a year is different to someone earning 40k a year so it’s hard to gauge your goals now without knowing your situation. One approach you could take is to set aside a certain percentage of your income however, depending on your income 10% might be a large portion or may not be.
The second part of this answer is how much time and increase is realistic? If you’re going to invest in shares or property you need to set aside some time. For shares a minimum of 5,6, or 7 years is expected. Anything less than 5 is too risky.
The most important thing I can share is that in this space of investing you have to realise that you might save fees by doing it yourself but most people don’t stop to compare that to the results you would get if you were part of a managed super fund, it’s crucial that people do their research.
To conclude, there’s no quick fix to get money really quickly, it’s important to look at your household budget. Think of it as a business, the money coming in the door needs to be more than what’s going out. It’s generally the outgoing costs that fluctuate, that’s when it becomes hard to control. The budget is the centre point because it shows if you can afford to invest.