Super investment options
Striking the right balance
With super, it's easy to set and forget. But choosing a suitable
investment option will have a major impact on how your super
performs. So see what your fund and others have to offer.
How super funds invest your
Super funds invest your money to grow your nest egg over your
working life. Most super funds let you choose from a range of
investment options, depending on how much investment risk you are
willing to take. For example, a conservative option will offer
lower risk but lower returns over the long term. A higher growth
option will have higher risk and experience more volatile returns
over the short term, but will usually achieve higher returns over
the long term.
If you are at least 10 years from retirement, you might consider
choosing a higher growth option as you have time to ride out the
ups and downs in the market. As you get closer to retirement, you
might decide to reduce your level of risk, as preserving your
capital will become more important.
You can find out about your fund's investment options by
visiting its website or by giving them a call. You will also find
detailed information in the fund's product disclosure statement (PDS).
The PDS will explain the:
- strategy behind each investment option
- investment returns it aims for (and possibly historical return
- risks involved.
Most funds have a 'default' investment option. This is usually a
balanced investment option that has a mix of defensive and growth
assets. A fund's default investment option is also its MySuper
MySuper accounts offer:
- a single diversified investment option or life-stage investment
- lower fees (and restrictions on the type of fees you can be
- simple features so you don't pay for services you don't
See MySuper for
Types of investment options
Your fund's various investment options may contain the same
types of assets, but at different weightings, to suit the level of
risk you are comfortable with.
Pre-mixed investment options
Invests around 85% in shares or property. Aims for higher
average returns over the long term. This also means higher losses
in bad years than those you would experience with lower risk
options. You may also be able to invest in a 'high growth' option
with 100% in shares and property.
Invests around 70% in shares or property, and the rest in fixed
interest and cash. Aims for reasonable returns, but less than
growth funds to reduce risk of losses in bad years. Those losses
usually occur less frequently than in the growth option. You may
also be able to invest in a 'moderate' option with around 50% in
shares and property.
Invests around 30% in shares and property with the majority in
fixed interest and cash. Aims to reduce the risk of loss and
therefore accepts a lower return over the long term. There is less
chance of having a bad year than in the balanced or growth
Invests 100% in deposits with Australian deposit-taking
institutions or in a 'capital guaranteed' life insurance policy.
This option aims to guarantee your capital and accumulated earnings
cannot be reduced by losses on investments.
This option aims to screen out companies that don't meet
environmental, social and governance standards determined by an
investment manager. A pre-mixed investment option that follows an
ethical strategy could sit anywhere along the risk spectrum - from
high growth to conservative.
Choose your own investment options
Some super funds let you customise your account by adjusting
weightings to the different asset types or pick direct investments,
within limits. For example, you may favour the outlook for
international shares over Australian ones, and ask your fund to
rebalance your portfolio or change the way future contributions are
Your fund may also allow you to pick direct investments, so you
can run your account like a self-managed super fund - but
without all the paperwork.
For some funds these direct investments include:
Picking a suitable
Most people work for 30 to 40 years and live for another 25 to
30 years after retiring. You want your super to grow and keep pace
with inflation during this time.
For this reason, a growth or balanced strategy may suit a
long-term investor who won't be spending their super for more than
A higher risk strategy may deliver higher returns, but the risk
is that there will be losses in bad years. Over 30 to 40 years,
it's likely that any growth strategy will lose money in at least 4
to 6 of those years. However, there are likely to be more ups than
Historically, over any 20-year period, a growth or balanced
strategy has given better returns than more conservative investment
options. You must decide if the likely rewards are worth the
Think before you choose an
When choosing your investment strategy, consider:
- your age
- how comfortable you are with investment risk
- how long before you will be able to access your funds
- your retirement goals.
If you won't be accessing your super for 5 or more years, your
focus should be on what it's likely to be worth in the future. It
doesn't matter what it is worth from day to day, in the same way
that the value of your home doesn't matter from day to day. It only
matters when you sell your house, or, in this case, take out your
super as a lump sum or start drawing regular payments from it.
A lower risk, lower return strategy (e.g. capital
guaranteed or capital stable) could suit people who need
greater security and less risk. This strategy may suit if you're
retiring and intend to withdraw all your super in less than 5
years, and you want to be sure how much money you'll have.
Case study: Adam's super investment strategy
Adam, 40, would like to
retire when he is 60. To make this happen, he knows he has to build
a nest egg. He has some shares and is paying off an investment
property with his sister.
Adam wants a super fund that offers relatively high returns over
the long term. He is willing to tolerate the risk of negative
returns in bad years. He decides on a growth fund as he hopes that
over the next 20 years the good years will outweigh the bad.
Picking the right investment option within super
is important whether you're 16 or 65. Your investment strategy will
influence how much money you'll have to retire on and how you live
your life in your retirement years.
Last updated: 27 Mar 2018