DIY - Is It The Right Choice?

Whenever you plan to start something new, you always consider all the pros and cons related to your choice. Looking up for all the possible outcomes related to any choice you are making will enable you to estimate the end result. Similarly, when you decide to open up a DIY super fund, make sure it will bring you some benefit.

In last twelve years there has been an immense increase in the number of people willing to manage their funds using the self-managed super fund. According to a report nearly 360,000 funds with almost 690,000 members held over 25% of total super assets in June 2007, which is definitely a great number.

Sometimes opting for DIY super to manage your funds isn’t the right choice for you to make. If your financial advisor or accountant suggests you to set up a self-managed super fund, make sure you are not investing less than $40,000. Anything less  as an investment is clearly not cost-effective.

DIY super funds under $50,000

The minister for superannuation and the Australian Taxation Office (ATO) has doubts on the statistics of people not suitable for a self-managed super fund set up.  If you are running a self-managed super fund with minor balances, they would turn out to be very expensive. High costs diminish the investment returns. According to ATO the percentage of operating expenses for DIY Super funds less than $50,000 is 10.5% of assets.

DIY super funds between $50,000 and $200,000

On the other hand, if you are starting your investment from balances between $50,000 and $200,000 they will cost you 2.63% to 3.55%. DIY super funds above $200,000 incur an average cost of 2.3%. This is the point where you need to take the right decision as to what amount you start your investment with.

Other costs

DIY super also comes with some maintenance fees to manage your funds. Usually the fee ranges from $1,500 to $4,000 to be paid annually. If you are taking efficient decisions regarding your selling and buying, you will be making fewer transactions which will in return cut down your ongoing fees. DIY super funds are also taxed. The tax rate of 15% is less than the marginal rate of tax being charged. Investors do not feel reluctant in paying these fees as these are relatively less amounts in order to manage their own money.

Should you or should you not?

In the end, it is the individual investor who decides whether DIY super funds are worthwhile for him. Total control and flexibility in making your own strategies attracts people. If you have time and the right skills to manage your investment, a DIY super fund is the way to go.