Generally speaking, Australian workers can choose which superannuation fund to use. Many don’t realise, however, that they can also choose how their superannuation is invested within the fund.
In fact, it’s a common misconception that the superannuation fund is responsible for how the money is invested, whereas it’s the member who ultimately carries that responsibility.
It’s well worth taking the time to check out the investment options within your fund and make sure you choose a suitable option. You can find out about the fund’s investment options by going to its website. Most super funds allow you to change your investment options online.
Pre-mixed investment options
Cash – 100% invested in deposits with Australian banks and deposit taking institutions. Aims to guarantee your capital and accumulated earnings.
Conservative – roughly 30% in shares and property and 70% in fixed interest and cash. Aims to reduce the risk of losses and accepts a lower return over the long term than investments with more shares and property.
Balanced – around 70% in shares and property and 30% in fixed interest and cash (it doesn’t actually sound “balanced”!). Aims for healthy long term returns but less than investments with higher exposure to shares and property.
Growth – approximately 85% in shares and property and 15% in fixed interest and cash. The aim is to achieve higher returns over the long term but can also result in higher losses in bad years than those options with less growth assets.
Ethical – an investment option that aims to invest only in companies that meet certain environmental, social and governance standards. An ethical option can sit anywhere from conservative through to high growth.
Choose-your-own investment options
Some funds also offer the ability to choose your own investment options such as Australian share and International share funds, exchange traded funds and term deposits. Sometimes the ability to choose shares in specific companies is offered – usually limited to the top 200 or so Australian companies.
Choosing the right investment option
There are a few main things to consider when choosing the investment options suitable for you:
- your age
- how comfortable you are with investment risk and volatility
- how long before you will be able to access your superannuation
Have a think about how much investment risk you’re comfortable with. An option with more exposure to growth assets such as shares and property will experience more volatile returns over the short term but will usually achieve higher returns over the long term.
A more conservative option will usually result in lower returns over the long term but will have less volatility over the short term.
There is no right or wrong answer. Everyone is different. But is usually follows that the longer the period of time your superannuation will remain invested the more likely a higher growth option will be suitable.
It makes sense to seek qualified advice if you’re unsure.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
