For any contributions made into your Superannuation (be that Super Guarantee contributions or any additional and voluntary contributions), your superannuation fund provider will typically invest your super savings throughout your working life, so you can hopefully retire comfortably. But how do they ensure that your funds do not simply stagnate once they are in the account? How do they maximise the profit from those contributions into your retirement funding? What Options do you have with your Superannuation Investments?
In general, your superannuation providers invest the money you place into your super fund into several investment options.
These options may vary depending on your provider’s preferences. Options could include high growth, diversified, balanced or cash, or a mix of these investment options.
Superannuation Options
High Growth
Growth options deemed high-growth investments aim for higher returns over the long term. However, the allocation may incur more significant losses when market conditions are volatile.
High-growth assets that fall into this category may include shares with a higher risk but a potentially greater return.
Balanced
Balanced options don’t aim to perform as well as high-growth possibilities over the long turn. However, the losses you may incur are more likely to be smaller when the market falters or becomes volatile.
Typically, investments in balanced options might look like:
- 50% or thereabouts in growth assets (such as shares)
- 50% or so in more defensive assets (which include investments such as bonds and cash)
(It is essential when comparing returns that you compare apples with apples – some balanced funds may have more in growth assets and less in defensive assets – say 70%/30%. These allocations are a more risky portfolio, but you would also expect higher long term returns)
Conservative Superannuation Options
Conservative investment options have a primary aim of reducing the risk of market volatility and, therefore, may generate lower returns as the invested assets are generally more stable.
Typical investments into assets for conservative options may look like:
- 35% in growth assets
- 65% or so in defensive assets.
Conservative options generally aim to reduce the risk of market volatility and, therefore, may generate lower returns. They typically invest around 35% in growth assets like shares, with the rest in more defensive assets like bonds and cash.
Cash
Cash investment options aim to generate relatively lower but more stable returns to safeguard the money in your account. These options may include investing exclusively in deposit-taking institutions (such as banks, building societies and credit unions) or other short-dated government or bank-issued securities.
These asset allocations in your super fund may differ according to your provider and the options available to your account type. It’s important to consider critical factors, such as the stage in your life that you’re currently at, your plans and your financial goals, before choosing the investment option that’s the right fit for you and your fund.
If you’re young, you may have more time to ride out market highs and lows and therefore be willing to take on more risk in the hope of achieving more significant returns. If you’re approaching retirement or getting closer to the age, you can access your super. You may be looking at more of a conservative approach.
Doing your research and understanding the risks involved in changing or altering how your assets are located could make a difference to the returns you generate and your final super balance.
Regardless, if you are unsure where to invest your super, please make sure you speak to a licensed financial adviser. We can certainly help you in that area.
