Investing your super
Wondering how investing and superannuation work together? Our team explains.
Super works by investing your super contributions into a portfolio of different investments, known as funds, to help grow the amount of money you have for retirement. There are many funds to choose from across different asset classes, strategies and risk profiles, depending on your needs. But how is a fund invested, and how does your investment in a fund add value to your super balance? Colonial First State explores the concept of unitisation and what it means for your money in super.
When you invest in a fund, you’re pooling your money with other investors to access a professionally managed portfolio of investments overseen by skilled investment managers. This can offer you access to a broad range of investment opportunities that may be otherwise inaccessible or difficult to manage on your own. All investors in a fund share the gains and losses it makes over time, with each member allocated a number of units depending on how much money they each have invested.
Super is invested in financial markets, which fluctuate higher and lower each day for a number of reasons. This means that the value of a fund’s investments (and, in turn, your overall super balance) will also fluctuate over time. Fluctuations are measured through daily changes in a fund’s unit price. The unit price can be used to determine the value of your investment in a fund as well as the contribution it makes to your overall super balance. Also note that fluctuations can vary depending on what asset classes your chosen fund is invested in. When making changes to your investment in a fund, the unit price you receive will depend on the value of the fund’s investments on that day – provided you have submitted your change request by the relevant cut-off time.
Example: The value of your investment and the unit price are connected
Note: For Colonial First State's FirstChoice Wholesale platform, the unit price you receive is the unit price which applies on the day we receive a transaction request, provided the request is received before 3 pm, Sydney time, on any NSW business day.
Colonial First State calculates the unit prices of funds on a daily basis, using market data for the prior business day in order to capture the relevant values of investments across global financial markets, which generally close in different time zones. That means the unit price you receive for an application or redemption made today will be calculated tomorrow based on today’s close-of-market values.
Example: Calculating the price of an Australian share fund
Investment managers use the money you have invested in a fund to buy or sell investments, and these often include brokerage or transaction fees. When units are allocated, an estimate of these likely brokerage or transaction fees is made and then included in the unit price. This means you are paying for your portion of the costs associated with entering or exiting a fund.
While Colonial First State applies this Spread, it is not a fee and it is not paid to Colonial First State. Rather, the amount is kept within the fund, and is designed to ensure existing investors are not paying the costs associated with other investors making changes to their investment in the fund. Accordingly, different prices are calculated for investors putting money in or taking money out:
Application price (putting money into the fund) = NAV price x (1 + spread %)
Withdrawal price (taking money out of the fund) = NAV price x (1 – spread %)
The Spread percentage is included in the relevant Product Disclosure Statement (PDS) for the fund.
Colonial First State offers more than 150 investment options for you to choose from – not only offering you more choice, but also helping you to diversify your investment mix. However, across our range of investment options, you will find that the unit prices differ for each fund. The amount that unit prices move each day will depend on each fund’s:
Regardless of the fund you’ve chosen to invest in, the unitisation process means that you own your share of the fund, and that the returns you receive are the returns of the investments within (after adjusting for fees and tax). However, if you’re unsure about unitisation or want to make changes to your super investments, consider speaking to a financial adviser who can work with you to review your super fund investments and offer suggestions to you based on your personal circumstances.