Consider the following when reviewing your investment strategy:
- Actual investments made– cross-check your SMSF’s investment strategy to the actual investments made. If the investments are different, you need to revisit your investment strategy.
- Investment rules– all investments should comply with the investment rules, discussed in detail in the Investment Rules module
- Documentation– check that regular review of the SMSF’s investment objectives and investment strategy is recorded in the minutes of the trustee meetings.
- Fund member involvement– ensure all SMSF members are involved in the investment strategy review process.
- Change in circumstances– consider the current personal circumstances of fund members (e.g., age and whether they are in payment phase) to ensure the strategy is still appropriate for the fund and the members. A review of investment strategy tends to be required for the following events:
- a member commencing a pension
- entry or exit of a member (e.g. death of a fund member); and/or
- changes in personal circumstances (e.g., divorce).
These changes can affect the asset mix of your SMSF. For example, if all members are in pension phase, an asset significant in size for the fund subject under a limited recourse borrowing arrangement may not be appropriate. This is because this asset may not generate sufficient cash flow to satisfy the minimum pension payment requirement.