How to find the right investment balance for your super


You can choose how you want your superannuation money invested. Most super funds offer a suite of investment choices including diversified investment options as well as different asset classes and member direct options if you wish to build your own portfolio.

The fund's balanced portfolio - usually the default investment option that most people automatically find themselves in - is fine for the majority of fund members. It is a mix largely of Australian and international shares, property, infrastructure and alternative assets as well as conservative investments, designed for medium- to long-term growth with a possible one negative year in four.

If you have a clear framework about how you want to invest your superannuation money, there is quite a lot you can do within your fund.

how to find the right investment balance for your superannuation

Self-managed super

If you are considering setting up your own self-managed superannuation fund (SMSF), check the investment options within your fund or other large low-cost funds before you incur the cost of a SMSF. You can typically buy direct shares, term deposits, exchange traded funds and listed investment companies through a direct investment option in a superannuation fund.

If you want to carry out your own asset allocation, you can directly allocate to asset classes such as Australian shares, international shares, diversified fixed income and cash.

Playing it safe

If you worry about share markets and would like more of your nest egg in safe investments, there may be a price to pay for investing conservatively.

Returns might be more stable, but they are expected to be lower.

Consequently, your money won't last quite as long in retirement.

Chasing growth

Life expectancy is increasing and people will need portfolios with a good probability of lasting at least until the age of 90.

Growth assets, which should generate sufficient returns to support lifestyle aspirations, can be expected to outpace inflation and minimise longevity risk.

But beware of taking on a level of investment risk that you ultimately find uncomfortable.

You may be prone to make an ill-timed adjustment to your investments after a bad year before losses are recovered. It is important that you can endure the volatility associated with your investment choice.

Going green

For investors who have particular concern that their money matches their values along environmental, governance and social lines, they can invest in tailored ESG investment options.

Superannuation funds typically offer an ethical or sustainable investment option but what it holds can vary. Now members can find out the exact companies, usually in a table, on the fund website.

You can look closely at each itemised investment your fund holds. This disclosure came into effect in March 2022 after a decade of debate.

Around 75% of Australians say social issues are important to them and want to know which companies their superannuation fund, bank or other financial institutions are invested in, according to the Responsible Investment Association of Australasia.

At the same time, they are aware that there is some greenwashing going on and want better regulation of hollow ESG promises.

If you are young there is strong evidence that a high growth or growth investment option can deliver higher returns over the long term. This is why some of the lifecycle super funds that automatically adjust your investment mix based on your age, invest more aggressively in the early years.

Leaving it to the experts

If you don't know much about investing or don't have the time to organise your investments, it is best to leave it up to a superannuation fund. Most have qualified, experienced investment experts plus well-run compliance and administration but always keep an eye on the median and long-term investment performance.

One of the worst mistakes I have come across was from a man who was in a solidly performing government superannuation scheme.

Many of his friends had self-managed superannuation funds so he asked an accountant to set one up. But he didn't know much about investing and when the same friends told him about some start up mining companies, he thought that sounded a good idea.

He put his life savings into two small mining companies that over time lost most of his money.

It is always a good idea to do your homework and talk to your superannuation fund before you switch funds and investment options.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.