You work hard for your money, including your superannuation. So - it’s important to understand how that money is invested, whether there is a default investment option and what other choices you have.
According to the Government’s MoneySmart website, before jumping in and deciding to choose or change your superannuation investments, it’s a good idea to take some time and check you understand the available options. Remember, the choices you make can make a big difference to how your super grows.
What options are available to you?
Superannuation funds all differ in the options they have available for their members. Generally speaking however, there will be several options available, including a premixed selection of investments. They generally include:
1. Growth funds
Investment mix
With a growth fund, a high proportion of your money is typically invested in shares or property, with a smaller portion in fixed interest or cash.
Potential returns
A growth fund aims for higher returns over the long term, but this means you could have a negative return more frequently than with lower-risk options.
2. Balanced funds
Investment mix
Your money is typically invested across growth assets such as shares or property and defensive assets such as, fixed interest or cash.
Potential returns
A balanced fund aims for reasonable returns, but they may likely be lower than those of growth funds. However, the risk of losses is lower when compared with growth funds.
3. Conservative funds
Investment mix
The majority of your money is invested in defensive assets such as fixed interest and cash, with some money invested in growth assets such as shares and property.
Potential returns
Generally, this option gives a lower return over the long term, but the trade-off is a reduced risk of loss. Conservative funds give less chance of a negative return when compared with a balanced fund.
4. Cash funds
Investment mix
Your money is invested in cash.
Potential returns
A cash fund aims to give you capital security – so the returns are likely to be low, but the likelihood of your losing money on your investment is reduced.
You also have the choice of creating your own investment mix using different asset types. For example, you may want to invest in a mix of shares through multiple investment options and allocate a percentage of your super money to invest in them.
Alternatively, you may want to consider direct investments – if your fund offers them.
How to choose an investment option that’s right for you
There are some things you should consider before choosing your investment option(s). Most importantly, if at any point you’re unsure about the options available to you, reach out to your financial adviser or super fund. While your fund can’t offer advice, they can provide you with factual information which might help.
Before choosing your investment, consider how long you have until retirement and your comfort level with investment risk.
If you’re not comfortable with riskier investments – which carry a higher likelihood of losing money – you may need to consider a conservative option. Just bear in mind that such an option will generally offer lower returns in the long term.
Some people choose to be more conservative with their investments as they approach retirement, as this reduces the risk of their balance going backwards. While others choose to seek higher returns, knowing this carries the risk of potentially losing some of their money. The choice is yours and should be based on your personal risk tolerance.
This article was previously prepared and published by AIA Australia Limited ABN 79 004 837 861 (AIA Australia) prior to Resolution Life’s acquisition of AIA Australia’s Superannuation & Investment life insurance business on 1 July 2023.
You work hard for your money, including your superannuation. So - it’s important to understand how that money is invested, whether there is a default investment option and what other choices you have.
According to the Government’s MoneySmart website, before jumping in and deciding to choose or change your superannuation investments, it’s a good idea to take some time and check you understand the available options. Remember, the choices you make can make a big difference to how your super grows.
What options are available to you?
Superannuation funds all differ in the options they have available for their members. Generally speaking however, there will be several options available, including a premixed selection of investments. They generally include:
1. Growth funds
Investment mix
With a growth fund, a high proportion of your money is typically invested in shares or property, with a smaller portion in fixed interest or cash.
Potential returns
A growth fund aims for higher returns over the long term, but this means you could have a negative return more frequently than with lower-risk options.
2. Balanced funds
Investment mix
Your money is typically invested across growth assets such as shares or property and defensive assets such as, fixed interest or cash.
Potential returns
A balanced fund aims for reasonable returns, but they may likely be lower than those of growth funds. However, the risk of losses is lower when compared with growth funds.
3. Conservative funds
Investment mix
The majority of your money is invested in defensive assets such as fixed interest and cash, with some money invested in growth assets such as shares and property.
Potential returns
Generally, this option gives a lower return over the long term, but the trade-off is a reduced risk of loss. Conservative funds give less chance of a negative return when compared with a balanced fund.
4. Cash funds
Investment mix
Your money is invested in cash.
Potential returns
A cash fund aims to give you capital security – so the returns are likely to be low, but the likelihood of your losing money on your investment is reduced.
You also have the choice of creating your own investment mix using different asset types. For example, you may want to invest in a mix of shares through multiple investment options and allocate a percentage of your super money to invest in them.
Alternatively, you may want to consider direct investments – if your fund offers them.
How to choose an investment option that’s right for you
There are some things you should consider before choosing your investment option(s). Most importantly, if at any point you’re unsure about the options available to you, reach out to your financial adviser or super fund. While your fund can’t offer advice, they can provide you with factual information which might help.
Before choosing your investment, consider how long you have until retirement and your comfort level with investment risk.
If you’re not comfortable with riskier investments – which carry a higher likelihood of losing money – you may need to consider a conservative option. Just bear in mind that such an option will generally offer lower returns in the long term.
Some people choose to be more conservative with their investments as they approach retirement, as this reduces the risk of their balance going backwards. While others choose to seek higher returns, knowing this carries the risk of potentially losing some of their money. The choice is yours and should be based on your personal risk tolerance.
This article was previously prepared and published by AIA Australia Limited ABN 79 004 837 861 (AIA Australia) prior to Resolution Life’s acquisition of AIA Australia’s Superannuation & Investment life insurance business on 1 July 2023.