Super is likely to be one of the largest investments you'll have over your lifetime so understanding the various investment options available, can help you make informed decisions.
Choosing an investment strategy that works for you can also impact the growth and performance of your super which is important when it comes to your retirement income.
In this article, we look at the different investment options available through super including some of their benefits as well as things to consider.
Lifestage investment options
Lifestage investment option is ideal for those who want a hands-off approach where you leave your super investments to the experts to manage for you.
One of the key features of Lifestage investment options is their diversified nature. These options generally invest across a mix of asset classes, including shares, property, fixed income, and cash, to spread risk and maximise returns over the long-term.
It is tailored to your birth decade and prioritises growth assets like shares during your younger years for higher potential returns. And, as retirement nears, the mix shifts towards safer assets, helping to protect your accumulated wealth when it matters most.
Choosing your own investment options
If you’re looking for more control over your investment portfolio, choosing your own investment options enables you to select asset classes based on your preference.
One of the main advantages of this approach is the ability to customise your portfolio to reflect your individual investment objectives and principles. For instance, if you have particular interests in specific industries or regions, you can allocate more of your investments accordingly. In addition, you can consider factors like your age, how comfortable you are with risk, and your retirement goals.
Hands-on
It's important to note that choosing your own investment options requires a higher level of knowledge and expertise in financial markets.
You'll need to actively monitor and manage your investments to ensure they remain aligned with your objectives and comfort with risk. This may involve conducting research, analysing market trends, and rebalancing your portfolio to maintain your preferred asset allocation.
May be more costly
Selecting individual investments within your super fund may involve higher costs compared to pre-mixed options, as you could be required to pay brokerage fees or other transaction costs.
If you're unsure about the complexities of self-directed investing, seeking advice from a licensed financial adviser can help you make informed decisions.
How to choose the right investment for you
Understand how you feel about risk
It’s important to make sure your investment options align to your risk preference. For example, investing in shares would be considered a high-risk option compared to cash given the extreme volatility. So, if potential losses in the short-term makes you feel uneasy, you may want to take a conservative approach.
Consider your investment timeframe
It’s important to determine when you plan to access your super savings as the longer your money is invested, the less impact short-term volatility will have on your retirement savings. This means if you have a long period until retirement, you may be able to take on more risk to achieve greater potential returns.
Review investment objectives
Whether you're aiming to build wealth, retirement income, or achieving specific milestones, selecting the right investment options is essential to delivering these objectives.
Speaking with a financial adviser can help you determine which investment options are most likely to deliver your objectives.
Bottom line: by educating yourself about the various investment options available, and seeking professional advice when needed, you can make more informed decisions that could have a significant impact on your future.
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