Where could responsible investing take you?
With trillions of dollars now pouring into sustainable investments worldwide, opportunities for investors are increasing rapidly.
Super is a tax-effective way of saving, but unlike a savings account, it is not a set-and-forget scheme. Since super is one of the biggest investments you will ever make and is reliant on different factors to grow, paying attention to it can pay off. Understanding your fund’s investment strategy and whether it aligns with your circumstances is just one way to maintain oversight of your super.
Super is for the long term, and comprises investments that are designed to help members ride out short-term losses as they grow retirement savings. According to findings on member behaviour, investors may be better off remaining invested when markets are volatile.* Reacting to events that have already occurred can mean they lock in losses or miss out on gains when markets stabilise, as well as increase the risks associated with switching between growth and conservative assets in an effort to ‘time’ conditions – potentially impacting the long-term value of one’s super fund.
If you aren’t invested in a lifecycle super option which moves your money from growth to conservative assets as you age, it may be worthwhile reviewing your risk tolerance and asset allocation to align your portfolio with the needs of your current life stage. For example, the needs of a working professional versus a retiree could differ, as may the composition of their portfolios – where one may have more capacity for riskier growth assets, while the other may prefer more defensive holdings.
While past performance is never an indicator of future performance, research could help you uncover opportunities in your investment portfolio. This may include keeping across market conditions, exploring different investment options and learning about the experience of management teams for insights on what holdings may be contributing to or detracting from returns.
In an ever-changing investment environment, the diversification of assets in your portfolio could balance loss in one area with growth in another to generate your overall returns. For example, over the September 2019 quarter, members saw that an allocation to FirstChoice Wholesale Australian Share returned 2.50% after fees and taxes, while an allocation to FirstChoice Wholesale Global Share – Hedged returned -0.74%. A portfolio that was diversified across both options would have resulted in a more balanced outcome for the quarter.
Through forums and general meetings, hands-on investors like SMSF members or investment managers can have a meaningful impact on companies. Colonial First State appoints skilled investment managers to make decisions on how to vote on investment issues on behalf of our members. For SMSF members, however, it can be helpful to participate in these opportunities as they could impact the value of their investments.
Investing can be complex and requires the expertise of a team to skilfully review and manage investments on behalf of members – but the fees involved could impact the long-term value of your super. What you may pay for an investment will be outlined in your option’s Product Disclosure Statement (PDS). Make sure to learn about the possible fees and costs involved by reading the PDS or speaking to your adviser.
As one of the most widely used tools for analysis, the price-to-earnings ratio (or P/E Ratio) can help hands-on members identify whether stocks are over/undervalued and how they compare to others within the same industry or benchmark. But while helpful, the ratio is only one part of the equation. Identifying risks and opportunities can be tricky and time-consuming. That’s why many investors harness the knowledge of investment professionals who know where – and how – to look.
Bigger companies don’t always present a better and safer investment. The small companies sector is just one market segment that could offer exposure to untapped opportunities with potential growth and returns. Over the last decade, FirstChoice Wholesale Australian Small Companies (which has delivered a positive net return of 9.0% after fees and superannuation tax) has exceeded the 7.3% return of FirstChoice Australian Share.#
Colonial First State has helped more than a million Australians with their superannuation, investment and retirement needs. Our investments team works alongside some of the world’s leading managers to skilfully identify and action the best possible investment opportunities for members. So whether you’re a new member or a more experienced member, help is at hand. Contact us on 13 13 36, or speak to your adviser for more information.
* Market volatility and customer behaviour – PPT, Ben Culbert (Manager – advanced analytics – DnA), October 2015, accessed November 2019
# These are returns for FirstChoice Wholesale Super options.
This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL). The information, opinions, and commentary contained in this document have been sourced from Global Markets Research, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 (CBA). Global Markets Research has given CFSIL its permission to reproduce its information, opinions, and commentary contained in this document and for CFSIL to authorise third parties to reproduce this document. This document has been prepared for general information purposes only and is intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are the views of CFSIL at the time of writing and may change over time. This document does not constitute an offer, invitation, investment recommendation or inducement to acquire, hold, vary, or dispose of any financial products. CFSIL is a wholly owned subsidiary of CBA. CFSIL is the issuer of super, pension and investment products. CBA and its subsidiaries do not guarantee the performance of CFSIL products or the repayment of capital for investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. The Target Market Determinations (TMD) for our financial products can be found at www.cfs.com.au/tmd and include a description of who a financial product is appropriate for. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from www.cfs.com.au or by calling us on 13 13 36. Past performance is no indication of future performance. Stocks mentioned are for illustrative purposes only and are not recommendations to you to buy sell or hold these stocks. This document cannot be used or copied in whole or part without CFSIL’s express written consent.