Is your super investment mix right for you?

Super is a long-term investment, and like any investment, the mix of investment types you’re exposed to – such as shares, property, fixed interest and cash – will help determine how your money grows over time.

If you’re in a balanced option, your returns may be lower, but your risk is also reduced.

If you’re in a growth option, you may see higher returns over the long term, but with more ups and downs along the way.

The difference between being invested in a growth option and a balanced option over time could be worth many thousands of dollars, depending on your actual returns and your account balance.

New research commissioned by CFS shows one in four Australians (25%) don’t know how their super is invested, and almost one in three (31%) say they are not confident in knowing when and how to change their investment mix¹.

The right option for you will depend on your personal circumstances, including your investment timeframe and your risk profile.

Let’s look at a few different scenarios to understand how different investment mixes could affect your super balance.

Ben earns $109,532³ a year, and has an average super balance at age 30⁴.  Ben’s employer pays 12% compulsory super into his account, and he makes no additional voluntary contributions.

As the table below shows, investing his super in a high growth investment option, at an estimated annualised return of 7% per annum, could deliver over $80,000 dollars more at age 60 than if Ben invested in a balanced option, at 6.20%².

Even if Ben switched to a higher-return option at age 50 and remained invested for 10 years, he could be $22,336 further ahead.

Note: Many people move some or all of their money to a more conservative investment mix close to the point of retirement. This minimises the risk of losses early in the drawdown period, which can affect super’s ability to generate long-term compound growth.

But what if Ben decided to contribute an additional $10,000 a year, or $833.33 per month? A high growth investment option could return over $120,000 more than a balanced option over 30 years².

Over 10 years, beginning at age 50, Ben could have $26,784 more in his account if he invested in a high growth option.

That’s why it’s important to choose your investment mix carefully, considering your age, investment timeframe, investment and contribution strategy, and appetite for risk.

To understand if your super’s investment mix is right for you, think about your risk appetite, how long your super is likely to be invested, and your investment strategy.

Here’s what to consider:

• Your investment strategy: Are you currently in a conservative, balanced, or growth option? Each has a different mix of investment types and expected returns, with shares being higher risk but generally offering higher returns over time, and cash considered low-risk, but also offering relatively low returns.

• Your investment time horizon: If you’re a decade or more away from retirement, you may be able to take on more risk for potentially higher returns.

Conversely, if you’re close to retirement, you may invest a portion of  your super for a higher return and keep some for the immediate years ahead in a lower risk option.

Or you may decide you’re comfortable with all or most of your super in a lower risk option. It’s important to understand that this could result in reduced earnings, so do your research and consider your options before changing your investment mix.

• Your risk appetite: Some investors are more comfortable with a higher level of risk, while others are not. Use our Risk profiler to understand what suits you.

If you’re unsure how your super is invested, it’s easy to find out. Simply download the CFS app, log in online via FirstNet, or check your statement.

This will include the name of the option in which your super is invested, and the mix of investment types within it, such as shares, property, fixed interest and cash.

You’ll also be able to see how your super has performed, meaning the percentage return it has delivered.