SMSF Investment Strategy (with Template)

Every self-managed super fund is legally required to have a written investment strategy — and to actually follow it. This is not a document you draft once and forget; the ATO’s approved auditor checks each year that your strategy exists, is current, and that your investments match it. A vague, copy-pasted strategy is one of the most common findings in an SMSF audit, so it is worth doing properly.

This guide explains what an SMSF investment strategy must cover, why each element matters, and gives you a simple template outline you can adapt. It builds on the self-managed super fund pillar guide and connects to your broader trustee responsibilities; for what you can actually invest in, see investing in shares through an SMSF and SMSF property and borrowing.

What the law requires

Super regulations require trustees to formulate, review regularly, and give effect to an investment strategy that has regard to the whole circumstances of the fund. In plain terms, the strategy must genuinely consider a defined set of factors — and your actual investments have to be consistent with what you have written. The required factors are:

• Risk and return — the risk involved in the fund’s investments and the likely return, given the fund’s objectives and cash flow needs.
• Diversification — the composition of the fund’s investments as a whole and whether it is adequately diversified.
• Liquidity — the fund’s ability to pay expenses and, importantly, member benefits and pensions as they fall due.
• Insurance — whether the fund should hold insurance cover (life, TPD, income protection) for one or more members.

That last point catches many trustees out: even a strategy that decides not to hold insurance must show the trustees actively considered it.

Why each factor matters

• Diversification. A fund heavily concentrated in a single asset — often one property or one company’s shares — is exposed if that asset falls. If your fund is deliberately undiversified, the ATO expects your strategy to explain why the trustees consider that appropriate and how they will manage the risk. A one-line “the fund may invest 0–100% in any asset class” statement is generally not enough on its own.
• Liquidity. The fund must be able to pay its bills, its members’ benefits and — once anyone is in pension phase — the minimum pension each year. A fund that is all property and no cash can be forced to sell at a bad time. Liquidity planning is essential if you hold property or run a limited recourse borrowing arrangement.
• Risk and return. The strategy should tie the chosen investments to the members’ age, retirement timeframe and risk tolerance — a fund with members near retirement usually needs a different balance from one with members decades away.
• Insurance. Group insurance in a large fund can be lost when you move to an SMSF, so consider whether members need replacement cover.

A simple template outline

Use the outline below as a starting point and tailor every section to your fund — a strategy that is obviously generic is a red flag. Record it, sign it, and minute that the trustees adopted it.

SMSF Investment Strategy — [Fund name]
Date adopted: [date]   |   Review date: [date]

1. Fund objectives
   - The fund's purpose (provide retirement benefits) and target
     return objective (e.g. CPI + X% over the medium term).
   - Members' ages, stage (accumulation / pension) and timeframe.

2. Risk tolerance
   - The level of investment risk the trustees consider appropriate,
     given members' circumstances and timeframe.

3. Asset allocation ranges
   - Target/permitted ranges by asset class, e.g.:
       Australian shares      __%–__%
       International shares    __%–__%
       Property               __%–__%
       Fixed interest / cash  __%–__%
       Other / alternatives   __%–__%
   - Rationale for the chosen ranges.

4. Diversification
   - How the allocation provides diversification, OR
   - If concentrated (e.g. one property), why the trustees consider
     it appropriate and how the risk is managed.

5. Liquidity and cash flow
   - How the fund will meet expenses, contributions tax, and
     benefit/pension payments as they fall due.

6. Insurance
   - Whether the fund holds/should hold insurance for each member,
     and the trustees' reasoning either way.

7. Review
   - When and how the strategy is reviewed (at least annually and on
     significant events: new member, retirement, large investment).

Signed by all trustees / directors: __________  Date: ______

Keep it current

The law requires the strategy to be reviewed regularly. Treat “regularly” as at least annually, and always after a significant event — a new member joins, a member starts a pension, the fund makes a large or concentrated investment, or a member’s circumstances change materially. Minute each review, even if nothing changes. An out-of-date strategy that no longer reflects the fund’s actual holdings is a classic audit finding.

How the strategy connects to everything else

The investment strategy is the hub of a compliant fund. It should be consistent with:

• your trustee duties to act in members’ best financial interests;
• your actual share portfolio and any property or LRBA holdings;
• your liquidity needs once the fund enters pension phase; and
• what the annual audit will check.

A worked example of tailoring

Imagine a two-member fund where both members are in their late 50s, roughly a decade from retirement, with a $500,000 balance and no plans to buy property. A genuine strategy for that fund might set growth-oriented ranges (say, a majority in Australian and international shares and ETFs, a slice of fixed interest, and a modest cash buffer), explain that the ten-year horizon justifies the growth tilt, note that the members hold life and TPD cover outside the fund so additional insurance is not required, and commit to shifting towards more defensive assets and a larger cash holding as the members approach pension phase. That single paragraph does more than a generic 0–100% template ever could, because it ties the numbers to the members’ real circumstances — which is exactly what the regulation asks for.

Contrast that with a fund holding one property bought through an LRBA: its strategy has to confront concentration head-on, explain why the trustees accept it, and set out precisely how the fund will hold enough cash to service the loan and pay expenses. The more unusual the holdings, the more the strategy has to say.

Common pitfalls

• Using a generic template with 0–100% ranges and no fund-specific reasoning.
• Failing to address insurance at all.
• A strategy that no longer matches the fund’s real holdings.
• Never reviewing it, or not minuting reviews.
• Ignoring liquidity in a property-heavy fund.

A well-written, genuinely-followed investment strategy protects the fund at audit and keeps your investing disciplined. Once yours is in place, make sure your investments — whether shares or property — actually match it, and that the fund stays liquid enough to meet its obligations.

This article is general information only and not financial or tax advice; consider your own circumstances and speak to a licensed adviser or the ATO before acting.