Grow your superannuation nest egg with investment knowledge
It pays to understand how your superannuation is invested, and finding out what assets sit inside your nest egg is easier than you might think.
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Knowledge is power in the world of wealth, and a key to growing your retirement savings is understanding just where it’s invested.
Many Australians ignore their superannuation despite it often being their biggest asset, with hundreds of billions of dollars sitting in super funds’ default investment options and members having no idea what they own.
However, discovering your super investment mix is not difficult. “People aren’t aware that the information is readily available,” says CreationWealth director Andrew Zbik.
It may only require an online check on your super fund’s investment portal, annual report or statement, or a phone call to the fund.
For retail superannuation containing different investment funds, members can use each fund’s unique APIR code to search online with the words “fact sheet” for a wealth of information, Zbik says.
“Your super fund can generally be organised in five broad risk categories – high growth, growth, balanced, moderate and conservative,” he says.
High growth means higher risk and invests mainly in shares and property in Australia and overseas, while conservative focuses more on cash and fixed interest investments.
The differences in investment returns can be significant. New data by research group Chant West shows super in an “all growth” option delivered annual returns averaging 9 per cent for the past decade while conservative funds delivered 5.3 per cent and balanced funds 6.4 per cent.
“What risk you are taking has a direct correlation to what return you get,” Zbik says.
Younger members have time on their side to benefit from growth assets, and most default super options now reflect this.
Association of Superannuation Funds of Australia CEO Dr Martin Fahy, pictured below, says it’s important for people to be engaged with their super and feel comfortable with the risk and returns of their investment option.
“For most Australians, superannuation is their largest financial asset outside the family home,” he says.
Australians’ average super balances top $170,000 for men and $122,000 for women, and for people aged between 55 and 65 the averages are $333,000 and $245,000 respectively.
“Compare the investment return in your fund with superannuation funds generally,” Fahy says.
“If the return you are receiving is below the average return, ask your fund about it.” The creation of MySuper options six years ago introduced a simpler low-fee default for people who don’t choose their super option when starting a new job.
“MySuper products have been specifically designed for individuals who are not actively monitoring their superannuation,” Fahy says.
Lifecycle investment strategies are also relatively new, and are now used in default super options of most retail super funds and many not-for-profit funds.
Chant West senior investment research manager Mano Mohankumar says lifecycle option members “are allocated to an age-based option that is progressively de-risked as that cohort gets older”.
It’s often based on the decade you were born, with 1980s or 1990s babies having more growth assets in super than those from the 1950s, and this reduces as they age.
“While they miss out on the full benefit in rising markets, older members in retail lifecycle options are better protected in the event of a market downturn,” Mohankumar says.