Choosing how your super’s invested
Want to take a more active approach with how your super’s invested? We address how to find the right investment options for you.
Key takeaways:
- MySuper products have a default investment option offered to those who want a hands-off approach where you leave your super investments to the experts to manage for you
- Pre-mixed investment options are ready-made investment strategies which generally consist of a blend of different asset classes in varying proportions
- If you’re looking for more control over your investment portfolio, choosing your own investment options allows you to select assets based on your preferences.
Super is likely to be one of the largest investments you'll have over your lifetime so understanding the various investment options available, can help you make informed decisions.
Choosing an investment strategy that works for you can also impact the growth and performance of your super which is important when it comes to your retirement income.
In this article, we look at the different investment options available through super including some of their benefits as well as things to consider.
MySuper investment options
MySuper is offered by many super funds and is ideal for those who want a hands-off approach where you leave your super investments to the experts to manage for you.
One of the key features of MySuper investment options is their diversified nature. These options generally invest across a mix of asset classes, including shares, property, fixed income, and cash, to spread risk and maximise returns over the long-term.
How your assets are allocated is based on a predetermined investment strategy that takes into account factors like your age, how comfortable you are with risk, and retirement goals.
Note: it’s important to be aware that while these options provide a diversified investment strategy, they are not personalised to you. This means they may not meet your specific needs including things like how much risk you’re willing to take on.
Pre-mixed investment options
Pre-mixed investment options offer a greater degree of customisation compared to MySuper options as you can select a strategy that aligns more with your risk tolerance and investment goals.
These investment options are ready-made investment strategies provided by your super fund. They generally consist of a blend of different asset classes such as shares, property, fixed income, and cash, in varying proportions.
The mix of asset classes are also tailored to different risk profiles, ranging from growth-oriented options which have a greater focus on growth assets like shares and property, to more conservative options which focus on preserving your money and have lower volatility.
Here are some examples of pre-mixed investment options:
Growth Option:
- Offers higher potential returns over the long term
- Invests primarily in growth assets such as shares and property
- Suitable if you are comfortable with taking on risk and will not be retiring soon
Balanced Option:
- Aims to balance risk and return by investing in a mix of growth and defensive assets
- Suitable if you’re seeking moderate returns with lower volatility than the growth option
Conservative Option:
- Focuses on preserving your money with minimal exposure to growth assets
- Ideal if you have a low tolerance for risk and are nearing retirement
Cash Option:
- Invests mainly in cash and cash equivalents
- Provides stability and liquidity but offers lower returns compared to other options
Ethical Option:
- Invests in companies and assets that align with ethical and socially responsible criteria
- Attractive to those who prioritise sustainability and ethics.
Choosing your own investment options
If you’re looking for more control over your investment portfolio, choosing your own investment options enables you to select asset classes based on your preference.
One of the main advantages of this is you can tailor your portfolio so it aligns with your specific investment goals and beliefs. For example, if you have a strong interest in certain industries or regions, you can invest more in those areas.
Hands-on
It's important to note that choosing your own investment options requires a higher level of knowledge and expertise in financial markets.
You'll need to actively monitor and manage your investments to ensure they remain aligned with your objectives and comfort with risk. This may involve conducting research, analysing market trends, and rebalancing your portfolio to maintain your preferred asset allocation.
May be more costly
Selecting individual investments within your super fund may involve higher costs compared to pre-mixed options, as you could be required to pay brokerage fees or other transaction costs.
If you're unsure about the complexities of self-directed investing, seeking advice from a licensed financial adviser can help you make informed decisions.
How to choose the right investment for you
Understand how you feel about risk
It’s important to make sure your investment options align to your risk preference. For example, investing in shares would be considered a high-risk option compared to cash given the extreme volatility. So, if potential losses in the short-term makes you feel uneasy, you may want to take a conservative approach.
Consider your investment timeframe
It’s important to determine when you plan to access your super savings as the longer your money is invested, the less impact short-term volatility will have on your retirement savings. This means if you have a long period until retirement, you may be able to take on more risk to achieve greater potential returns.
Review investment objectives
Whether you're aiming to build wealth, retirement income, or achieving specific milestones, selecting the right investment options is essential to delivering these objectives.
Speaking with a financial adviser can help you determine which investment options are most likely to deliver your objectives.
Bottom line: by educating yourself about the various investment options available, and seeking professional advice when needed, you can make more informed decisions that could have a significant impact on your future.