Your superannuation is an extensive investment portfolio that requires careful attention and planning to ensure it grows at a good pace until you reach your retirement age. There are multiple options for you to consider when it comes to investing your super. These options, depending on your Superannuation Fund, may include:
- Conservative
- Balanced
- Growth
- Ethical
- and single-asset
There are super funds that offer more options than this, however, these five are considered the basic ones available through most funds.
If you’re brand new to the world of investing, it’s easy to feel overwhelmed by all the different options available. However, it is important to understand them, so you can choose the right investment option that suits your current stage of life.
Seeking financial advice can help you make informed decisions tailored to reaching your retirement savings goals and dream retirement. Retirement planning can make a big difference when you start early so take the time to seek retirement planning advice today.
Here are 3 things you should know to determine how your super is being invested and how to determine the right retirement planning strategy for you:
Investing Your Superannuation
Your superannuation is invested in different growth and defensive assets to help you increase your wealth while protecting it. Growth assets carry higher risks, though they also can bring you higher returns. Similarly, defensive assets have much less risk, but they also don’t offer high returns.
- Growth assets – include Australian shares, infrastructure, international shares, private capital, including investments in non-publicly listed private companies, and property like commercial, industrial, or real estate trusts.
- Defensive assets – include hedge funds, cash products like term deposits and savings accounts, and fixed interest, like corporate and government bonds.
The Main Types of Super Investments:
Most super funds have an option between numerous pre-mixed, diversified investment portfolios. You may also opt to build your own if you prefer being more proactive and hands-on with managing your super with the help of a financial adviser.
The pre-mixed investment portfolios invest your fund in various growth and defensive assets to achieve the highest possible return while keeping risk at a minimum. It’s important to keep in mind that market conditions can have a major impact on your investment returns and retirement income.
Here are three investment options you can consider:
- Growth or High Growth
The growth and high-growth investment strategy options are geared towards earning the highest investment returns possible, making them high risk. This option allocates 80% to 90% of your super balance to growth assets like property or shares. If your fund has high-growth investments, it will usually give 100% of your balance to high-risk assets. These investment options work best for more extended periods, like 7 to 10 years or even more, to help grow your super balance long term.
- Conservative
Conservative investments usually carry less risk than the growth or high growth options. It is usually considered best suited for those nearing retirement, as they’ll want to safeguard their savings. This option usually allocates 20% to 30% of your super balance to growth assets, like property and shares, and the rest will be in lower-risk options, like bonds and savings accounts.
- Ethical
Lastly, the ethical investment option allows you to allocate your super fund into socially responsible assets. That means you won’t be investing in companies associated with gambling, tobacco production, ammunition manufacturing, and other similar companies. The risk level and asset allocation highly vary between funds.
However, this option offers an equivalent level of risk as to the balanced investment option, making it medium to high risk. It can be challenging to discern the truly socially responsible companies, by working with an ethical financial adviser you can be reassured that your investments align with your values.
Some people believe that ethical investments don’t perform as well as other options, but these portfolios usually provide similar or even better returns. Not only will you be growing your money, but you’ll be supporting the growth of companies whose values are similar to yours.
Choosing Your Superannuation Investments
There are a few things to consider when selecting your super investment option. It may be beneficial for you to seek financial advice to help you make the right investment decisions.
For instance, if you’re young, then you may want to consider investing in growth or high-growth opportunities, then switch to a balanced or conservative approach as you near retirement.
It’s also crucial to think about your risk tolerance. If investment choice is focused on high-risk assets, making you anxious, a balanced option may suit you much better.
If you have strong personal values, you’ll want to look at where exactly your super is invested in with each option, especially if you’re particular about avoiding some unethical companies.
Lastly, look at the fees, as various investment options usually charge different prices and the relevant product disclosure statement of your super fund.
It may be beneficial to seek an ethical retirement planner who takes the time to understand your financial situation and tailor financial strategies towards achieving your personal objectives. When it comes to planning ahead for your retirement it’s important to think of what your retirement goals are to ensure your strategies are on track to achieving them.
How you invest your money in your super is essential to building your nest egg and ensuring you have enough money set aside for your ideal retirement. By familiarising yourself with the different investment options, you can determine the right choice for your needs.
Seek Personal Financial Advice for Ethical Investments and Retirement Planning
For more advice on retirement planning, be sure to reach out to us at Novo Wealth. We are a team of ethical financial advisers in Adelaide helping professionals and business owners invest responsibly. Through our principles of sustainable investing, we can help you transition from working life into retirement.
Book an appointment today, and let’s discuss how to secure your financial future the ethical way.
