How do you choose where to invest your super?

Making sure you’re getting the most out of your money is always important. If someone offers you an extra $10,000 you’re not likely to turn it down. But when it comes to making investment choices in super, you can be a lot clearer on the best options for you if you know just how much your super needs to grow between now and when you retire. That way you can narrow down your choices to the ones with the potential to earn the return you need to get your balance to where it needs to be.

This is why it’s important to find out how much super you have and how much is enough for a comfortable retirement before choosing your investment options with the appropriate level of risk involved. Of course, you don’t have to rely only on investments to reach your super balance goal for retirement, or you may not be comfortable with the amount of risk you need to take to get there. You can also make extra payments into super to help your balance grow faster.

We’ll be talking more about risk later in this topic. But, If you’re more than 10 or 20 years away from retirement, you might consider growth investment options for your super that come with bigger potential returns but also a higher risk of making a loss from time to time.

As long as there’s a good chance of those investments bouncing back by the time you access your super, then a period of losses isn’t really a problem for you. And as you get close to retirement, you can look at switching to defensive, lower risk investment options. This can give you peace of mind that your super balance won’t be going backwards when you’ll be needing it to pay your bills in a few years’ time. That’s not to say that you should not invest in growth assets during retirement – your retirement may last decades so some growth may be needed. But reviewing your investments as you approach retirement is important.

“Whether the value of your super investments has grown by 10 per cent one year or fallen five per cent the next isn’t really relevant. Of course, it doesn’t make you too comfortable to see a few thousand dollars wiped off your balance. But if your super is locked away for the next 20 years and your investment grows 20% overall during that time, then the negative returns don’t really matter. It’s only when you need to access that money during a period of losses that these downs become as important as the ups.”

- Genevieve Frost, IOOF team member

To get comfortable with making choices for your super investments, it helps a lot if you’re well informed about your options. For some of us, the pros and cons of different types of investments isn’t the most riveting topic and we’d rather leave it to the experts. If this is you, you might be happier to leave investment choices up to your super fund and keep your money in their default option. Or you can speak to one of our team who can talk to you about ways to get help from a professional with your investment choices in super.

Maybe you do know a little about investing already or you’re keen to wade in and explore what your investment options in super are all about. If you are, then have a look at our next topic, What investment options are available? to get you started with making your own investment choices in super.