SMSF Investment Strategy: How to Review Yours Properly (Not Just Tick the Box)

Every year, SMSF trustees sign an investment strategy document. Many of them sign the same one they signed last year. The accountant provides a template, the Trustee may (or may not) make a few edits, the auditor checks it against the fund, and everyone moves on.

The auditor checks that your strategy covers the basics and that the fund follows it. The auditor doesn’t check whether it’s right for you. That part is your job.

It’s also the most useful part. The ATO makes you do this, but it’s for your benefit. Done properly, your annual review is the one moment each year to check whether your super is on track for the retirement you want.

What is an SMSF investment strategy?

Your SMSF investment strategy is your fund’s written plan for how it invests. The ATO describes it as your plan for making, holding and selling investments to meet your retirement goals. It should explain why and how you chose your investments.

Super law requires every trustee to prepare one, follow it, and review it regularly. The ATO says to review it at least once a year and record that you did, for example, in your annual trustee minutes. Your auditor then checks that the fund’s investments match what the strategy says.

The problem with the template

Many SMSF investment strategy templates say something like this: the fund may invest 0 to 100% in Australian shares, 0 to 100% in international shares, and 0 to 100% in cash.

As our principal Christian Borkowski puts it, “It’s not really a strategy. It’s a means to an end.” It exists so the auditor can tick a box.

The ATO agrees. Its guidance says that 0 to 100% ranges on their own are not a valid approach. It warns that templates may not meet super rules, must be tailored to your fund, and must be reviewed regularly. A strategy should explain how you plan to invest and why.

What your strategy must consider

This is where the review gets useful. Super law asks trustees to weigh up five things. Read each one and ask yourself honestly how confident you are.

Risk and return. How much return do you need to reach your goal, and how much risk are you taking to get it? A fund that made 10% isn’t automatically ahead of one that made 8%. If the 8% came with far less risk, it may be the better result.

Diversification. Is your money spread across different types of investments, or bunched in a few? Owning ten Australian stocks isn’t the same as being diversified if they all rise and fall together.

Liquidity. Can the fund turn assets into cash when it needs to? A fund holding one commercial property can be asset rich and cash poor.

Ability to meet liabilities. Can the fund pay its bills? And more importantly, can it pay your pension once you retire? Liabilities aren’t just the accountant’s fees. Pension payments are liabilities too.

Insurance. Should the fund hold life or disability cover for each member?

If you read that list and felt a bit less sure than you’d like, you’re not alone. That’s exactly what the annual review is for.

What a good SMSF investment strategy looks like

Here is a simple example of the difference. It’s an illustration only, not a recommendation for your fund.

A template says: Australian shares 0 to 100%. International shares 0 to 100%. Cash 0 to 100%.

A real strategy says something like:

• Goal: for a hypothetical couple, both members retire at 62 and draw $120,000 a year between them.
• Return needed: about 5.5% a year after fees, based on current balances and contributions.
• Target mix: 35% Australian shares, 45% international shares, 10% property and infrastructure, 10% cash and fixed interest, each with a narrow range either side.
• Why: the members have 15 years to retirement, so the fund can ride out market falls. International shares spread the risk beyond one economy.
• Liquidity: from age 58, build up cash and defensive assets to cover the first three years of pension payments.
• Insurance: both members hold life and disability cover outside super. The trustees have considered this and decided not to hold it in the fund.

Every line has a reason. That’s what the ATO is asking for, and it’s what makes the review worth doing.

How to review your SMSF investment strategy properly

A real review asks better questions than “does the fund match the paperwork?” Here’s how we approach it.

1. Start with your goals, not your investments. What does the fund need to do for you? A dollar amount, a date, and the return needed to get there. Everything else follows from that.

2. Check your stage of life. Your strategy at 40, with kids at home and a growing balance, shouldn’t look like your strategy at 60. The ATO lists age, employment status and retirement needs as things your strategy should consider.

3. Look at where the money actually sits. Many self-managed funds lean heavily on Australian shares and cash. But Australia makes up less than 2% of the global economy. If most of your fund sits here, you may be missing much of the world’s opportunities. A diversified growth portfolio will often hold more overseas than in Australia.

4. Measure performance fairly. Compare your return against the risk you took, not just the ASX headline. Then compare it against what you need to reach your goal.

5. Write down your reasoning. If the fund holds most of its money in one asset, the ATO expects you to record that you considered the risk and how the fund will still meet its goals.

6. Review it when life changes, not just once a year. The ATO says a market fall, a member joining or leaving, or starting a pension should all prompt a fresh look.

The power of 2%

Between 40 and 60, the review is mostly about return. A small gap each year compounds into a big number.

Take a 40-year-old with $300,000 in super and $20,000 a year going in from their employer. At 6% a year after fees, they reach about $1.70 million by age 60. At 8% a year after fees, they reach about $2.31 million.

Same person, same contributions, same 20 years. That extra 2% a year is worth more than $600,000.

This is an illustration, not a forecast. It assumes steady returns, contributions at the end of each year, no contribution tax and no inflation adjustment. Real returns go up and down, and can be negative. The point is how much a small difference compounds, and why it’s worth checking your fund is set up to earn what you need, at a level of risk you’re comfortable with.

Why the years around retirement matter most

From about 55, the question changes. It’s no longer only about growth. It’s about making sure your money is there when you stop earning.

The years just before and just after retirement are when most people feel the most anxious about money. Your balance is at its peak, your pay is about to stop, and a market fall at the wrong moment can do lasting damage. A bad year early in retirement hurts more than the same bad year later on, because you’re selling assets to pay yourself while prices are down.

That’s why we start building a safety buffer in the years before retirement. For many people planning to retire at 60, that means starting around 57 or 58. Our approach splits your money into three buckets:

• Years 1 to 3: cash and conservative assets that cover your living costs. The aim is for you not to have to sell shares in a downturn to pay the bills.
• Years 4 to 7: a balanced, lower-risk bucket that tops up the first one as it runs down.
• Year 8 and beyond: growth assets with time to ride out the ups and downs.

This came out of the lessons of the GFC, when people who retired into a falling market were hit hard. The aim is simple. A market fall early in retirement shouldn’t force you to sell your growth assets at the bottom.

Common questions

Is there an SMSF investment strategy template I can use?

You can start from a template, but the ATO warns that templates may not meet super rules. Your strategy has to be tailored to your fund and your members, and it has to explain how and why you invest. A copy-and-sign template usually doesn’t do that.

How often do I need to review my SMSF investment strategy?

At least once a year, and you should record the review and any decisions, for example, in your trustee minutes. You should also review it after a big market fall, when a member joins or leaves, and when a member starts a pension.

What happens if my strategy isn’t compliant?

If your auditor finds a breach, you need to fix it, usually with a signed and dated addendum or a trustee minute. If the breach meets the ATO’s reporting criteria, your auditor must report it to the ATO.

Can my SMSF hold most of its money in one asset?

Yes, but your strategy needs to show that you considered the risk of not being diversified. It also needs to explain how the fund will still meet its goals and cash flow needs.

If I use an adviser, am I still responsible for my SMSF?

Yes. As trustee, you’re legally responsible for your fund, even when an accountant or adviser helps run it. An adviser helps you make better decisions, but you still need to stay on top of them.

What changes when my SMSF moves into pension phase?

Your fund now has to pay you a pension every year, so liquidity matters far more. Your strategy should show how those payments will be funded without being forced to sell growth assets at a bad time.

Not sure how your strategy stacks up?

Self-managed super funds are a great vehicle. They give you control and choice, and they suit plenty of people. But they come with responsibilities that are easy to underestimate. And “self-managed” doesn’t mean you have to do it alone. It doesn’t mean handing it over either. Even with an adviser on board, you’re still the trustee, and the responsibility for your fund stays with you. The best results come when you and your adviser work on it together. We bring the strategy and the expertise, and you stay across the decisions.

If you can answer the five questions above with confidence, and your strategy explains the reasoning behind every choice, well done. Keep going.

If you’re not 100% sure, or your strategy has been running quietly in the background for years, it’s worth a conversation. Book an initial chat with our wealth team. We’ll look at your current strategy, what your fund needs to do for you, and whether it’s set up to get there.

This article is general information only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and seek personal advice before making any decisions.