Installment Warrants, everything you need to know for your super...

Installment Warrants are a way to leverage your DIY Super fund. This can work for you if the market goes up, but against you if the market goes down.

These allow you to buy control of an underlying share by paying anywhere between 30% to 70% of the share price, thus giving you control but not ownership.

You will already be familiar with Installment Warrants if you bought into a Government sell off of a company. You may pay some money up-front, then have the right to not pay the second amount and maybe get some money back, or pay the second amount and take control of the share, or sell them to somebody else or take up some new one over the same shares. As you can see you have many options.

Government authorities say that having an Installment Warrants isn't a loan, because you've no obligation to pay the final installment. Therefore they aren't inhibited by the borrowing limitation of DIY retirement funds. But you do need to be careful of how many you have, because it may be looked at as being more than 10% of the fund in a derivative.

All that aside, Installment Warrants can add octane to your fund in three ways:

1) You can get leverage into a share, 2) You get increased dividends per dollar because you're leveraging your position, and 3) You can also get increased dividends because the dividends may be tax effective. As you can see, the opportunities are wide-ranging and rewarding and can help you leverage your fund. But it needs to be done in line with your investment strategy. And you need to understand a few things about them before going all-out in this strategy.

I'd suggest that it's a good strategy for a market that seems trending up for at least a month.

To learn more about Installment Warrants and how they work inside your fund, what your risk profile needs to be to trade them in your super and what type of investment strategy and trust deed you need go to Installment Warrants and DIY Retirement Guide A List of resources for Australian Super Collectable CPA Australia Depriciation Finacial Advisor Imputation Credits Instalment Warrants Joint Venture with Super Super Annuation Super News Tax and Super Tax Write Offs Unit Trusts Unit Trusts in Australia Women and Super SuperWatch