Superannuation Fund Investment Options and Strategies

Super funds offer many investment options, including pre-mixed investment strategies, sector/specialist funds and investment opportunities in direct shares. However, for many of us, 80% in fact, superannuation gets too complicated so we opt for the easy way out – the default option. This is where your funds are directed if you haven?t instructed your super fund otherwise.

The default option might be an easy decision but it can also be costly. As each fund has a different default investing strategy, it?s wise to carefully investigate the default option of your fund. Generally you can find this in the Product Disclosure Statement (PDS) and/or the super fund annual reports.

If the fund invests a high percentage in “unlisted” or private investment programs, then dig a little deeper. Do you think this fund has the expertise to manage direct investments like that? If so, great but if not, consider other investment strategies within your fund that may better suit your purposes and your individual risk profile for superannuation.

 

Investment strategies explained

Super funds tailor their investment strategies according to risk. The level of risk you are prepared to accept usually depends on how close you are to retirement. Essentially, if you?re young, you?ve got plenty of time to ride the market roller coaster and make the most of your investment money before you retire.

However, if retirement is looming, it?s more than likely you won?t want to risk your super locked up in a high risk investment. Sure, the markets will even out and eventually generate healthy profits but you don?t have the time to wait. That?s why super funds offer a variety of investment strategies and portfolio mixes. Here?s a brief explanation.

 

Super Fund Pre-Mixed Investment Strategies

The most common levels in pre-mixed investment strategies are Income Funds, Balanced Funds and Growth Funds. A super fund can have a minimum of 3 pre-mix options upwards. The strategies are based on the percentage mix of portfolio applied to the asset classes. The most common asset classes are cash, international and domestic shares, property and fixed interest (e.g. bonds etc).

 

Sector/Specialist Super Funds

In order to diversify an investor?s portfolio, funds also offer investment into sector/specialist funds. Most of these funds are either managed in-house or outsourced for the benefit of members. The common sector or specialist funds are made up of Australian shares, international shares, Australian property, international property, Australian fixed investments and international fixed investments. Some funds also invest in specialist markets like emerging markets in Brazil, Russia, India & China or Asian and European markets. They also offer specialist investment options in geared and capital guarantee investments. Further options include small cap companies, blue chip funds etc.

 

Direct Shares Superannuation Funds

Certain funds also provide the option of investing in direct shares and apply a brokerage fee for the transaction. Some offer only Australian stocks while others will invest in international markets.

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