Member's investment profile


Keep it simple

Direct property


Chapter 5 - Investments in an SMSF

One of the main advantages of a self managed superannuation fund is that the trustees are in control of the investments made by that fund.

The rules governing self managed superannuation stipulate that a fund must have an investment strategy. You can learn more about these rules by watching this short video from the Australian tax office:


The Member’s Investment Profile


When developing an investment strategy, the first thing to consider is the members’ investment profile. Put simply, an investment profile is a way of establishing the level of risk that a member is prepared to undertake in the pursuit of investment returns. As a general proposition, higher returns are related with an increased risk of a negative return – which is a fancy way of saying ‘losing money.’

Investment profiles lie on a spectrum. At one end of the spectrum is what is known as a ‘conservative’ investment profile. As this name suggests, a conservative strategy aims to minimise the risk of losing money. Conservative investors tend to prefer investments such as cash and cash equivalents over riskier assets such as property or equities. At the other end of the spectrum is what is known as a ‘high growth’ investment profile. Under a high growth investment strategy, investments such as equities or property, with their potential for greater returns, are typically preferred.

Put very generally, the preferred investment profile is most influenced by how soon an investor is going to need the money under investment. If money is needed in the short-term, a conservative investment profile is typically applied. If money is not needed until the very long term, then a high growth strategy generally makes more sense.

It is worth remembering that superannuation assets are different to other forms of assets that the person may have. The main difference is that assets held within superannuation are preserved until the member reaches preservation age. In addition, assets held within superannuation are intended to finance a retirement, which may last 20 years or more.

As a result, people frequently underestimate how long-term – and therefore how growth oriented – the investment strategy for their superannuation benefits should be. Generally speaking, people can tend to convert their superannuation investments to a conservative profile too soon.

For example, consider a newly married couple, both aged 30, who are saving to purchase a family home. The couple have $50,000 in personal savings and $20,000 in superannuation benefits. The $50,000 of personal savings will be used as a deposit for a home. Therefore, this money should only be invested in very conservative investments such as a bank account, where the risk of losing money in the short-term is low.

But superannuation is different. This couple cannot access their superannuation for at least 25 years. Therefore, a conservative strategy makes no sense for the money held in superannuation. That money would more typically be invested in some form of high growth option.

In this way, the same person can have two or more investment profiles for different elements of their financial management.




One of the chief advantages of a self managed superannuation fund is that the investment strategy for the self managed super fund can tie in very closely to the members’ non-super investment strategies. This cannot always be the case with managed superannuation, where the member typically has very little control over the investment assets of the fund.

For example, consider a couple who are running their own business. They decide to use their superannuation fund to purchase premises which they will then lease to their business. In so doing, they reduce the risk to their business of being asked to vacate their business premises should an external landlord decide not to renew a contract. They create a situation where the landlord and the tenant have a common interest. When people own a business, but business is typically the centrepiece of their investment strategy. The ability to establish a self managed superannuation fund which then invests in a way that compliments that business can add to the effectiveness of the overall investment strategy.

Keep it simple


Many successful trustees of self-managed superannuation funds choose to keep the investment strategy of their fund very simple. For example, a very simple SMSF might make use of just two investments: cash management account into which contributions are made; and a single managed fund that in turn invest into equities (for example, an exchange traded fund tracking a market index). The cash management account is a conservative investment option. The index tracking managed fund is a growth focused investment option.

The proportion of overall fund assets held in each of these to investment options would then vary according to the investment profile of the members of the fund. For example, if the fund has two members, and they are both aged in their 70s, the fund may choose to hold 60% of its total benefits in cash management account and only 40% in the growth oriented ETF. Conversely, if a fund has two members aged in their 30s, the fund may choose to hold a bare minimum of its total benefits in cash management account, with almost everything invested in the growth oriented ETF.

As a general proposition, administration of an SMSF is simplest where the investments made by the fund are simple. Administration becomes more complex the more investments that the fund makes. This means that a simple investment strategy can have a flow on effect of minimising administration and auditing expenses of the fund.

Direct Property


Direct property can be either commercial or residential. For clients who wish to invest their superannuation benefits in direct property, a self managed superannuation fund is basically the only way to do so. It is unusual for a managed superannuation fund to invest in direct property.

Clients wishing to make an investment into direct property do need to take care. Certain types of property, such as residential property, cannot be used by any person related to a member of a self-managed super fund that owns the property. The rules for commercial property are less stringent, but nevertheless they do still apply.

We recommend getting professional advice prior to the purchase of any form of property within a self-managed superannuation fund.



Under certain conditions, it is possible for a self-managed superannuation fund to borrow to purchase investment assets. This ability is discussed in the next chapter.

4. Using a SMSF: Contributions
6. Limited recourse borrowing