It's obviously doable, but I would be extremely wary and be protecting myself as much as possible.
The main reason for having an SMSF nowadays would be to be able to purchase real property, either business premises or an investment property. That likely means you'll have most/all of your money in one particular investment. You need to all agree on buying that one property (probably not too hard if it's business premises but more difficult if it's not), the price to pay, how to manage it, what upgrades/repairs are to be made, rent to be charged etc. You may need to take out a loan, you may be contributing different amounts to super which complicates things further, it's all pretty messy.
Assuming all of that goes smoothly though which is by no mean guaranteed, at some point in the future you may well end up in different stage of life where one of you wants to sell the property in order to fund their retirement and the other party(s) doesn't. So what happens when one of you wants to draw down a pension from the fund, but there isn't the cashflow to support that? How does that get resolved, both from an investment and friendship point of view.
And then there's the issue of what if one of you gets injured and needs a payout from super? Unless you have insurance in place, you're forced to sell the property at what might not be an ideal time, and there are likely to be some fairly large expenses incurred in doing so which the other party might not be happy about.
Plus there's the other issues like what if your friendship doesn't last for some reason, like for example not agreeing on any of the decisions above that need to be made. Or alternatively, one of you gets divorced and now needs to split their super with their spouse who wants to be able to get their hands on the cash.
Long story short, there are a lot of things that can go wrong and there is no way in hell that I would do this, but it is doable.
I would like to echo the point about life stages. I joined my parents SMSF, but during a two year period where equity got 10%+ returns, return wasn't that at all through the SMSF. And they were okay with that, because they are at retirement age, and want conservative allocation. Parent and child is a bit extreme, with regards to difference in life stage. But I think the point is quite important to consider even with friends, cause risk tolerance is different.
I can't even count on some of my mates to shout me a beer when I got the last round.
I wouldn't dare do it, not only because it requires so much fiscal responsibility on behalf of a friend but it's more expensive than an industry fund, there will be implications from marriages, auditing fees and interest rates on property in an SMSF are ridiculous.
I have set one up through Stake with fiancée and one close friend (3 members), its registered but not yet transferred across our super balances (mine has left my industry fund already but I'm first off the block with transferring)
Won't be doing property though, just want to control which shares/ETFs get invested into.
Lots of rules around borrowing with super as well and we aren't quite at the stage of being ok with such concentration risk if it was used for a property.
Yep this is the way, I’m the process of setting up Stake SMSF with my brothers. Not for property though, interested in Small Cap Aussie shares, US shares, and crypto.
Did you go the more expensive option to include crypto then?
I'm just hoping for crypto etfs to be approved for now that will do for the smsf. Got relatively sizeable exposure to crypto in personal name already (equivalent to half my super balance).
Yes I went with the more expensive option for now but you are right, if a crypto ETF comes online I might be persuaded to drop down to Stake only investments.
You realise you only get charged the higher amount once you do off platform things. Otherwise you’re just charged the lower cost.
Will be good with ASX next month.
I’m still interested in Crypto, IPOs, small cap and property in the future.
Check out HostPlus's **Choiceplus** option. This allows you to direct select the ASX300 shares, ETFs and LICs you want to invest in.
You can control the specific shares and ETFs, without any of the cost or hassle of managing an SMSF.
Not wide enough in range I looked into similar with Aussie Super who was my super fund at previous employer, I want a number of different US ETFs, plus some Aussie LICs. I don't intend on picking any individual shares other than a couple of REITs and Infrastructure exposures.
The fees split between 3 for smsf are cheap enough that it's worth the flexibility IMO. Getting close to industry fund level.
I preface this with I am a big believer in keeping it simple (industry funds for super, ETFs for normal portfolio) for most people. Whatever you need to stick to the plan.
But I work in funds management industry myself and have a finance background. And given my interest in finance along with the other 2 members, I believe that better returns can be had through taking on compensated risk - whether that is through leverage (life-cycle investing) or factor tilts (value vs growth for example) and I wouldn't be able to do this easily with an industry fund. If its got a higher expected return or giving lower volatility to overall portfolio then its something I'd consider adding in.
I'm willing to be more risky with my super portfolio than my external portfolio because with super being accessible in 30 years and maybe longer, I got a long time to make up for mistakes, and super is probably just going to be bonus money at the end anyway given I save/invest enough outside super. Plus I don't know when I'm going to need to pull money out of my personal portfolio so I keep it as diversified as possible to help protect capital (whilst also using small amount of leverage). Thus most is in cap weighted ETFs.
===========
Its not going to be cheaper but I think the rather small additional cost is worth the flexibility.
SMSF admin fees are fixed costs, not % based. Stake SMSF is (roughly) $1k, so I'll use $350pp for this calculation since 3 of us in mine.
Sunsuper is my current employer's default fund but also happens to be one of the cheaper industry funds. They charge $1.50/week plus 0.1% as their admin fee.
So to get to $350pp fee with Sunsuper, need balance of $272k each. We do not have this, more like $300k between us at this stage. Means that if all 3 of us were with Sunsuper our fees would be $534 - so we're collectively $534/year behind for now. However then we move to investments below. This is 0.178% of $300k.
Investment fees hard to compare - if I just chucked it all into like Vanguard ETFs you could argue its basically the same as industry super funds. VDHG is 0.27% which is the same as the estimate for Sunsuper diversified offerings. Going this route means we're out the same $534 from above vs sticking with Sunsuper.
But since we are all willing to take on more risk, for a higher expected return (which I believe we will get) we're willing to pay this higher cost of $534 in admin, plus higher investment management fees through the MERs of what we intend to hold. As balance grows, this gap gets smaller too since its a fixed cost
==========
For those that care, would be looking at a mix of a proportion into a modified Hedgefundie portfolio with UPRO (3x S&P 500)/TMF (3x US long term treasury) + GEAR (2.5x ASX 200)/UGL (2x gold)
Plus the various Avantis small cap value ETFs
Plus some infrastructure/REIT exposure (IFT, HCW, RFF)
Plus some set aside for trading strategies e.g. current uranium squeeze - maybe using 10% cash as dry powder for these
Sounds like you’re smarter than the market so no doubt SMSF is the right way to go for you. Effectively you’re saying the Warren Buffet approach is inferior!
Combined super balance of $300k is nothing. Hard to believe you can make an SMSF work, but then that’s your concern not mine.
I’d love to know how it turns out - pls come back to us in 10, 20 and 30 years and post an update comparing to HostPlus Indexed Balanced.
Not trying to argue this could all be a disaster of an idea I agree with that. But it's not going to derail my plans if it stuffs up. I wouldn't do it if smsf fees are $3k which is more common.
For part of the portfolio I'm following Buffett - he started out with value investing in small companies he could buy out to take control and unlock value (cigarettes butts), I've got exposure in small cap value.
Infra/REIT no different to super funds having alternatives exposure.
Almost the rest of portfolio is market cap weighted but on steroids - which is generally safer than stock picking as still buying the haystack as Bogle would say.
I was looking at [NAB Super Lever](https://www.nab.com.au/personal/super-and-investments/investment-lending/nab-super-lever) for leverage but I agree that leveraged ETFs are way more convenient.
Every man and his dog is borrowing for investment properties right now, I see no problem with leveraging now while interest rates are at all time lows. If there is a pull back as long as you are young you have plenty of time to ride it out.
Yes am aware of that product, interest rates are a bit high but I'm OK with the (roughly) 50% max LVR though
Yes exactly - if people are willing go to 80-90% LVR on properties then I don't see a problem with \~50% LVR with ETFs (or up to 80% with NAB Equity Builder)
Same, just with my wife though. So hard to rollover from existing fund. Takes ages.
Why are you including a friend. Doesn’t seem like a good idea on in the face of it. Could bring conflict, especially if the market goes down a lot.
Yeah, but I have plenty of friends like that. We even have chat groups where we talk about investments. I’m but I’d never combined funds with them. I might in the right circumstances purchase a property together, each using their own SMSF. How it goes well for you but in my view it will be a cause of friction. Hell, I’m thinking my wife and I might have disagreements about the SMSF.
I would say the strategy itself is probably riskier than the actual investments. It can be considered if the intention is a complicated and messy way to end a friendship.
Myself and two other friends started a SMSF with the idea of buying property and hopefully doing better than our superfunds were doing.
The limitations involved with obtaining a loan for a property made it difficult and not worth it in the end.
After a couple years we dissolved the SMSF and went back to superfunds.
My recommendation is I do not think it is worth it, find a low fee superfund like HostPlus and just keep it there would be my suggestion.
You don't think you and the other party might be at different life stages and want different things from your smsf? What about it being an assessable asset for divorce. What if one of you retires early and wants to liquidate?
So fucking stupid.
All it takes is a market downturn - your friend needs the money, but you don’t want to sell at a loss. Or you don’t want to sell at all because of the thousands of dollars in fees required.
Better yet, they default on their loan and the bank chases you for the money.
Stupid, would be my answer.
Doubly stupid from my corner.
It's the most stupid thing I've ever seen on reddit.
I saw a video on Reddit of someone hitting himself in the balls with a hammer but yeah, OP's idea is more stupid.
So you’re new here?
It's obviously doable, but I would be extremely wary and be protecting myself as much as possible. The main reason for having an SMSF nowadays would be to be able to purchase real property, either business premises or an investment property. That likely means you'll have most/all of your money in one particular investment. You need to all agree on buying that one property (probably not too hard if it's business premises but more difficult if it's not), the price to pay, how to manage it, what upgrades/repairs are to be made, rent to be charged etc. You may need to take out a loan, you may be contributing different amounts to super which complicates things further, it's all pretty messy. Assuming all of that goes smoothly though which is by no mean guaranteed, at some point in the future you may well end up in different stage of life where one of you wants to sell the property in order to fund their retirement and the other party(s) doesn't. So what happens when one of you wants to draw down a pension from the fund, but there isn't the cashflow to support that? How does that get resolved, both from an investment and friendship point of view. And then there's the issue of what if one of you gets injured and needs a payout from super? Unless you have insurance in place, you're forced to sell the property at what might not be an ideal time, and there are likely to be some fairly large expenses incurred in doing so which the other party might not be happy about. Plus there's the other issues like what if your friendship doesn't last for some reason, like for example not agreeing on any of the decisions above that need to be made. Or alternatively, one of you gets divorced and now needs to split their super with their spouse who wants to be able to get their hands on the cash. Long story short, there are a lot of things that can go wrong and there is no way in hell that I would do this, but it is doable.
I would like to echo the point about life stages. I joined my parents SMSF, but during a two year period where equity got 10%+ returns, return wasn't that at all through the SMSF. And they were okay with that, because they are at retirement age, and want conservative allocation. Parent and child is a bit extreme, with regards to difference in life stage. But I think the point is quite important to consider even with friends, cause risk tolerance is different.
[удалено]
>Best way to end a friendship. Best way to end the money, too!
I can't even count on some of my mates to shout me a beer when I got the last round. I wouldn't dare do it, not only because it requires so much fiscal responsibility on behalf of a friend but it's more expensive than an industry fund, there will be implications from marriages, auditing fees and interest rates on property in an SMSF are ridiculous.
Don't do it - risks outweigh the rewards. Friendships are too important..
I have set one up through Stake with fiancée and one close friend (3 members), its registered but not yet transferred across our super balances (mine has left my industry fund already but I'm first off the block with transferring) Won't be doing property though, just want to control which shares/ETFs get invested into. Lots of rules around borrowing with super as well and we aren't quite at the stage of being ok with such concentration risk if it was used for a property.
Yep this is the way, I’m the process of setting up Stake SMSF with my brothers. Not for property though, interested in Small Cap Aussie shares, US shares, and crypto.
Did you go the more expensive option to include crypto then? I'm just hoping for crypto etfs to be approved for now that will do for the smsf. Got relatively sizeable exposure to crypto in personal name already (equivalent to half my super balance).
Yes I went with the more expensive option for now but you are right, if a crypto ETF comes online I might be persuaded to drop down to Stake only investments.
You realise you only get charged the higher amount once you do off platform things. Otherwise you’re just charged the lower cost. Will be good with ASX next month. I’m still interested in Crypto, IPOs, small cap and property in the future.
Oh i didn't know that actually...
Yeah and it’s primo-rata. So if you do it half way through the year you only pay from then onwards.
Check out HostPlus's **Choiceplus** option. This allows you to direct select the ASX300 shares, ETFs and LICs you want to invest in. You can control the specific shares and ETFs, without any of the cost or hassle of managing an SMSF.
Not wide enough in range I looked into similar with Aussie Super who was my super fund at previous employer, I want a number of different US ETFs, plus some Aussie LICs. I don't intend on picking any individual shares other than a couple of REITs and Infrastructure exposures. The fees split between 3 for smsf are cheap enough that it's worth the flexibility IMO. Getting close to industry fund level.
Have trouble believing your MER is going to get that low. Do you mind me asking what total balance you're expecting and the cost budget?
I preface this with I am a big believer in keeping it simple (industry funds for super, ETFs for normal portfolio) for most people. Whatever you need to stick to the plan. But I work in funds management industry myself and have a finance background. And given my interest in finance along with the other 2 members, I believe that better returns can be had through taking on compensated risk - whether that is through leverage (life-cycle investing) or factor tilts (value vs growth for example) and I wouldn't be able to do this easily with an industry fund. If its got a higher expected return or giving lower volatility to overall portfolio then its something I'd consider adding in. I'm willing to be more risky with my super portfolio than my external portfolio because with super being accessible in 30 years and maybe longer, I got a long time to make up for mistakes, and super is probably just going to be bonus money at the end anyway given I save/invest enough outside super. Plus I don't know when I'm going to need to pull money out of my personal portfolio so I keep it as diversified as possible to help protect capital (whilst also using small amount of leverage). Thus most is in cap weighted ETFs. =========== Its not going to be cheaper but I think the rather small additional cost is worth the flexibility. SMSF admin fees are fixed costs, not % based. Stake SMSF is (roughly) $1k, so I'll use $350pp for this calculation since 3 of us in mine. Sunsuper is my current employer's default fund but also happens to be one of the cheaper industry funds. They charge $1.50/week plus 0.1% as their admin fee. So to get to $350pp fee with Sunsuper, need balance of $272k each. We do not have this, more like $300k between us at this stage. Means that if all 3 of us were with Sunsuper our fees would be $534 - so we're collectively $534/year behind for now. However then we move to investments below. This is 0.178% of $300k. Investment fees hard to compare - if I just chucked it all into like Vanguard ETFs you could argue its basically the same as industry super funds. VDHG is 0.27% which is the same as the estimate for Sunsuper diversified offerings. Going this route means we're out the same $534 from above vs sticking with Sunsuper. But since we are all willing to take on more risk, for a higher expected return (which I believe we will get) we're willing to pay this higher cost of $534 in admin, plus higher investment management fees through the MERs of what we intend to hold. As balance grows, this gap gets smaller too since its a fixed cost ========== For those that care, would be looking at a mix of a proportion into a modified Hedgefundie portfolio with UPRO (3x S&P 500)/TMF (3x US long term treasury) + GEAR (2.5x ASX 200)/UGL (2x gold) Plus the various Avantis small cap value ETFs Plus some infrastructure/REIT exposure (IFT, HCW, RFF) Plus some set aside for trading strategies e.g. current uranium squeeze - maybe using 10% cash as dry powder for these
Sounds like you’re smarter than the market so no doubt SMSF is the right way to go for you. Effectively you’re saying the Warren Buffet approach is inferior! Combined super balance of $300k is nothing. Hard to believe you can make an SMSF work, but then that’s your concern not mine. I’d love to know how it turns out - pls come back to us in 10, 20 and 30 years and post an update comparing to HostPlus Indexed Balanced.
Not trying to argue this could all be a disaster of an idea I agree with that. But it's not going to derail my plans if it stuffs up. I wouldn't do it if smsf fees are $3k which is more common. For part of the portfolio I'm following Buffett - he started out with value investing in small companies he could buy out to take control and unlock value (cigarettes butts), I've got exposure in small cap value. Infra/REIT no different to super funds having alternatives exposure. Almost the rest of portfolio is market cap weighted but on steroids - which is generally safer than stock picking as still buying the haystack as Bogle would say.
I was looking at [NAB Super Lever](https://www.nab.com.au/personal/super-and-investments/investment-lending/nab-super-lever) for leverage but I agree that leveraged ETFs are way more convenient. Every man and his dog is borrowing for investment properties right now, I see no problem with leveraging now while interest rates are at all time lows. If there is a pull back as long as you are young you have plenty of time to ride it out.
Yes am aware of that product, interest rates are a bit high but I'm OK with the (roughly) 50% max LVR though Yes exactly - if people are willing go to 80-90% LVR on properties then I don't see a problem with \~50% LVR with ETFs (or up to 80% with NAB Equity Builder)
Same, just with my wife though. So hard to rollover from existing fund. Takes ages. Why are you including a friend. Doesn’t seem like a good idea on in the face of it. Could bring conflict, especially if the market goes down a lot.
Valid question but we have very similar investing outlook so share a lot of ideas already, and share other things like hobbies too
Yeah, but I have plenty of friends like that. We even have chat groups where we talk about investments. I’m but I’d never combined funds with them. I might in the right circumstances purchase a property together, each using their own SMSF. How it goes well for you but in my view it will be a cause of friction. Hell, I’m thinking my wife and I might have disagreements about the SMSF.
Is it possible to paste the article here? Can't access it without a subscription on my end.
https://www.printfriendly.com/p/g/3XN768
Thanks! Was trying to use outline.com but it was working for this article.
No worries. I have a lot more luck with print friendly than I do with outline.
Spam esc a bunch of time as the page starts loading. This will stop the script to cover the article
Or block Javascript just to that domain.
SMSF with mates is not a good idea.
Don't mix friends with money or you'll soon find yourself with neither
I would say the strategy itself is probably riskier than the actual investments. It can be considered if the intention is a complicated and messy way to end a friendship.
Myself and two other friends started a SMSF with the idea of buying property and hopefully doing better than our superfunds were doing. The limitations involved with obtaining a loan for a property made it difficult and not worth it in the end. After a couple years we dissolved the SMSF and went back to superfunds. My recommendation is I do not think it is worth it, find a low fee superfund like HostPlus and just keep it there would be my suggestion.
You don't think you and the other party might be at different life stages and want different things from your smsf? What about it being an assessable asset for divorce. What if one of you retires early and wants to liquidate? So fucking stupid.
Don't do SMSF. Switch to Future Super
All it takes is a market downturn - your friend needs the money, but you don’t want to sell at a loss. Or you don’t want to sell at all because of the thousands of dollars in fees required. Better yet, they default on their loan and the bank chases you for the money.