It can be tempting to treat superannuation as a ‘set and forget’ investment. In many cases, annual statements show steady growth, making it seem like everything is working as it should. However, depending on your age and financial goals, your superannuation may benefit from a more appropriate investment mix.
Put simply, you need the right balance — for your circumstances — between growth potential and defensive security.
Understanding the difference between growth and security investments
Most super funds offer a range of investment strategies, often labelled differently but generally falling into the following categories:
Growth or high growth
Typically includes shares and property. These assets offer higher long-term growth potential but can experience short-term volatility.
Balanced
A mix of growth assets like shares, alongside defensive investments such as fixed interest (e.g. government bonds) and cash.
Conservative
Focused primarily on fixed interest and cash, with a smaller allocation to shares. Designed to reduce volatility and preserve capital.
Extremely low risk
Concentrated in cash or term deposits. Offers stability and security, but generally delivers lower long-term returns.
Some super funds automatically adjust your asset allocation as you age, so it’s worth checking whether this applies to your fund.
Factors that should influence your super investment choices
Your ideal investment strategy will evolve over time. Key factors to consider include:
- Your age
- Your risk tolerance
- Time remaining until retirement
- Other assets you hold outside of super, such as property, savings or investments
Possible scenarios
Jessica, 25 has over 35 years until retirement. With a long investment horizon, she may choose a high-growth option, allowing time to ride out short-term market fluctuations in pursuit of higher long-term returns.
Michael, 45 plans to retire at 60. With strong equity in his home and other investments, he may choose to shift toward a balanced portfolio to consolidate gains while still allowing for growth.
Amanda, 47 has a lower super balance due to part-time work over many years. With around 20 years until retirement, she may opt for a higher-growth strategy to improve her long-term position.
David, 61 is approaching retirement and prioritises capital preservation. A conservative investment approach may help protect his accumulated super while still providing moderate growth.
Review regularly, but avoid frequent changes
It’s important to review your superannuation investment strategy regularly to ensure it aligns with your current circumstances and long-term goals.
However, switching too frequently — particularly in response to short-term market movements — can be counterproductive and may result in missed growth opportunities when markets recover.
You should also monitor your fund’s performance and fees. If your current fund is underperforming, you may consider switching, but this should be done carefully and with proper advice.
Adjusting your super strategy or changing funds are important decisions. Seeking guidance from a qualified financial adviser can help ensure your choices are aligned with your overall financial plan.
If you’d like help reviewing your superannuation investment settings, speak with one of our financial advisers to ensure your strategy is working for you.
