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Australians are typically hands-off when it comes to managing super. At most, they check their balance and perhaps make a one-off contribution from time to time.

So, it’s always a good idea to take an interest and gain a working knowledge of your options.

At the end of the day, this money is yours. The health of your retirement savings depends on what assets your super fund invests in – and the level of risk you take on. The Australian government certainly agrees. In mid-2021, it introduced reforms requiring super funds to be more transparent and provide more details about how investments perform.

What assets do super funds invest in?

Super funds typically have a team of experts working to manage investments for members. They will focus on longer-term strategies to meet the investment objectives of the fund. This could mean investing in infrastructure projects with long lead times such as airports and toll roads, innovative companies with good prospects (think the likes of Netflix or Amazon) or those in promising fields such as renewable energy and medical research.  

Broadly speaking, the first category or class of assets can be described as growth assets, including shares and property. These are likely to experience greater fluctuations in value, which can experience negative returns. However, they also have the potential to generate higher returns in the long term (compared to defensive assets).

Then there are defensive assets such as term deposits and fixed interest investments, including government and corporate bonds. These can be relatively inexpensive. They also provide more modest returns at lower levels of risk.

Super funds either invest in specific classes or they diversify. Generally, an approach of spreading risk is better. That way, your portfolio doesn’t hinge on a specific asset class – say, there is a property market collapse or a rise in interest rates devalues your bond holdings.

Remember – your view matters

Depending on your investment goals, your risk appetite and your investment timeframe can influence where you invest your money whether it be spread across a variety of investments or a single investment.

Each asset class has a different level of risk and is expected to perform differently in any given market environment. Outlined below is a summary of the different investor profiles and the investment strategies for each profile. If you are not aware of what your investor profile is please check your annual statement.

Balanced

A balanced investment strategy aims for reasonable growth of your super over the medium to long-term and a bit of risk; but not too much. It usually involves investment of about 70% in growth assets and the remaining 30% in defensive assets.

Note that most super funds will offer this as the default option for its members if a member does not select an option upon joining the fund. The Balanced option involves diversifying across a broad range of investments – including Australian and international shares, cash, property, infrastructure and bonds.

Growth

A growth strategy aims for higher average investment returns over the long term, investing in assets that are expected to outperform the overall market. However, this growth strategy can also involve higher risk as it could also mean taking on greater losses when the market is not performing well. The mix will typically involve about 80-85% in growth assets such as shares and property, and the remaining 15-20% in defensive assets such as fixed interest and cash-based investments.

Conservative

Pretty much the opposite to growth, with about 70% of your super in defensive assets. This reduces the risk of investment loss. You’ll have less chance of suffering a bad year. But you’ll also need to be willing to accept lower returns.

Cash

As the name suggests, a cash investment approach means investing in deposits with Australian banks. As cash is a defensive asset, a 100% cash approach will generate stable returns but may not provide long term growth of other assets. Typically, it is the least risky of all asset classes.

You can learn more about your Resolution Life super fund's approach by visiting our website, https://resolutionlife.com.au/superannuation and selecting your product from the drop-down,you can access our investment reports here too. If in doubt, speak to your financial adviser.

Which investment strategy is best?

Barring a few exceptions such as severe financial hardship or other compassionate grounds, you can only access your super when you retire or reach preservation age. This is somewhere between 55 and 60, depending on the year when you were born. You can find more information on when you can access your super here. The length of time until that day arrives should heavily guide your investment approach.

For example, if you’re in your early 20s and new to the workforce, it is likely that you won’t be accessing your super for at least 10 years or more. You may seek a growth or balanced investment strategy – and may be prepared to withstand greater volatility in search of returns.  

What if you’re in your 50s? You may be more conservative as it may only be a short time before you retire. You might look to reduce your risk of losses and preserve your portfolio. In which case, you may not want to utilise a growth strategy. 

The bottom line

Remember that every super fund is different – and the most appropriate investment option may change depending on your age, life situation, your view on risk and the state of the economy. So, it’s worth reviewing your investments regularly.

Doing nothing and sticking with the default option remains possible. But always remember you have the power to handle your super in a way that corresponds with your values, financial aspirations and retirement goals.

Any advice in this article is general in nature and is provided by Resolution Life. It does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of the advice having regard to those matters as well as the relevant product disclosure statement, available from Resolution Life at resolutionlife.com.au or by contacting us, before making a decision about the product. You may want to consider obtaining financial advice tailored to your personal circumstances before you make any decision by speaking with a financial adviser.

What you need to know

Any advice on this website is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), and is general advice and does not take into account your objectives, financial situation or needs. Before acting on this advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, as well as the relevant product disclosure statement and/or policy document, available from Resolution Life at resolutionlife.com.au or by calling 133 731, before making a decision on whether to acquire, or continue to hold, the product.

The Target Market Determinations (TMDs) for our financial products (where applicable) can be found at Target Market Determinations (TMDs). The TMDs describe the key features and attributes of an applicable product that affect whether it is likely to be consistent with the objectives, financial situation and needs of consumers in the target market.

Resolution Life is part of the Resolution Life Group and can be contacted via contact us or by calling the phone number mentioned above.