Daily Mail Australia’s new columnist James Wrigley, senior financial advisor at First Financial, answers readers’ money questions every Wednesday.
Hello James,
I have a question about my retirement. At age 40, I’m considering transitioning my super to a self-managed super fund (SMSF) and allocating between 50 and 100 percent of my portfolio to Bitcoin. While I am aware of Bitcoin’s volatility, I am confident in its long-term growth potential as part of my retirement strategy.
I would greatly appreciate your opinion on the possible transition to an SMSF, as well as your opinion on whether I should invest fully in Bitcoin or diversify to 50 per cent.
Also, if you have any recommendations for an SMSF adviser or accountant who specializes in this area, I would love to connect with them to discuss further.
Thank you for your time and knowledge.
Sincerely,
Allen.
Hi Allen,
An SMSF is a great step. My preference is to look at it from the angle of why you shouldn’t have one. I’ve seen too many people think setting up an SMSF is a good idea, only to set one up, move their super, buy a couple of shares, not know what to do next and then just leave their super sitting. Cash: If you do this for too long, it will be a recipe for disaster.
Without proper advice and insight into investing, the vast majority of people would be better off sticking with one of the big super funds. At 40 years old (me too) you will have had super your entire working life. If you have a reasonable income and average returns from a retirement fund, there’s a good chance you’ll leave work with enough funds to go a long way toward a comfortable retirement. Superannuation should not be used to speculate large proportions of your money in individual assets.
I cannot comment on Bitcoin, I am not licensed to do so. But I do know that some Bitcoin ETFs have been launched. Perhaps you could use a pooled super fund that allows you to buy a Bitcoin ETF and not need to set up the SMSF.
An SMSF is like a trust, with its own unique set of rules (known as a trust deed), as well as having to comply with superannuation law.
When you set up an SMSF, you become responsible for its running (known as a trustee) and for complying with a host of laws. You also lose access to a variety of protections that exist to help protect you and your retirement savings that exist in a regular retirement fund.
If you do not comply with all the legal requirements for operating an SMSF, you could personally be subject to large fines, could lose half of your SMSF balance in tax and could face a prison sentence. It’s a big problem. Too many people set up SMSF when they shouldn’t.
Having said all that, I’m a big fan of an SMSF, but only for the right person.
You’ve no doubt heard the phrase “don’t put all your eggs in one basket”: I would never recommend anyone put 100 percent (or 50 percent) of their retirement into a single asset.
You comment on diversification, but even keeping 50 percent of your retirement in one asset is not diversified. Chances are good that wherever your retirement is now, that balance is invested in a hundred or more different assets—that’s diversification. It won’t make you rich overnight, but you’re not likely to lose everything overnight either.
All the best.
Jaime.
Send your questions to James at thewealthbuilder@dailymail.com.au
James Wrigley is a representative of First Financial PTY LTD ABN 15 167 177 817 AFSL 481098
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