Your investment strategy is your plan for making, holding and realising (selling) investments consistent with your investment objectives and retirement goals.

It should set out why and how you’ve chosen to invest your retirement benefits in order to meet these goals.

It is important your investment strategy is in writing.

It needs to be tailored to your specific circumstances and consider things such as age, employment status and retirement needs of the members.

You need to address the following:

• risks involved in making, holding and realising, and the likely return from your fund’s investments regarding its objectives and cash flow requirements
• composition of your fund’s investments including the extent to which they are diverse (such as investing in a range of assets and asset classes) and the risks of inadequate diversification
• liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses such as the cost of managing the fund and income tax expenses)
• fund’s ability to pay benefits (such as when members retire and require a lump sum payment or regular pension payments) and other costs it incurs
• whether to hold insurance cover (such as life, permanent or temporary incapacity insurance) for each member of your SMSF.

It is not a valid approach to merely specify investment ranges of 0 to 100% for each class of investment.

Your investment strategy should not be a ‘set and forget’ document.

You should review your strategy regularly to ensure it continues to meet the current and future needs of your members depending on their personal circumstances.

Certain significant events should also prompt you to review your strategy, such as:

• a market correction
• when a new member joins the fund or departs a fund
• when a member commences receiving a pension. This is to ensure the fund has sufficient liquid assets and cash flow to meet minimum pension payments prior to 30 June each year.

You should consider seeking advice from your usual SMSF adviser or a licensed financial adviser.

Note that your usual SMSF adviser may not be a licensed financial adviser and legally capable of assisting you with your investment choices, rather than documenting what you have decided.