Is an aggressive or balanced super investment option better when you're young?

If you’re just starting out in your career, you may be wondering what kind of superannuation investment option you should choose now to achieve the greatest outcome by the time you reach retirement. 

While there’s no guarantee that any specific investment option will set you up with the highest return, it’s important to understand what your choices are so you can make an informed decision rather than remaining complacent.

If you’re a member of a MySuper fund, perhaps selected by default when you started working your first job, chances are your current investment option is balanced.

But is a balanced super investment option the right choice when you’re in the early stages of your career, or would you be better off taking on a higher level of risk with a goal of higher average returns over the long run?

To help you make this decision, you’ll need to first understand the difference between these two investment options as well as the pros and cons of each. 

What is a balanced super option?

A balanced super investment option has a moderate risk profile with a goal to achieve reasonable returns. According to Moneysmart.gov.au, this option will typically have around 70% of its investments in shares or property, and 30% in fixed interest and cash.

As its name suggests, a balanced super option typically offers a balanced level of risk, as it presents less of a risk of loss than more aggressive options, but a higher chance of strong returns than more conservative options.

In contrast, it may cause you to miss out on higher-growth opportunities than if you were to choose an aggressive investment option.

What is an aggressive super option?

Aggressive (or growth) super investment options aim for higher average returns over the long run, with an investment mix of around 85% in shares or property and 15% in fixed interest or cash. High-growth options may invest 100% in shares or property, according to Moneysmart.com.au.

The key benefit of choosing an aggressive super investment option is that it offers more opportunity for high returns than balanced or conservative options. Of course, it also comes with a higher risk of loss than other options.

How to choose the right investment option for you

Superannuation is a long-term investment that typically begins when you start your first job – often in your late-teens or early 20s – and lasts at least until you reach retirement age in your 60s. For this reason, it’s often believed that choosing an aggressive investment option with higher potential for growth tends to be less risky and potentially more rewarding in the earlier stages of your working life, because if your super suffers any significant losses, it still has time to swing back the other way.

However, the level of risk you choose to take on is a decision dependant on your personal preferences and circumstances. Consider speaking to a financial adviser for guidance specific to your needs.

Don’t forget to routinely compare your super fund’s performance against others to ensure it remains competitive and consider whether the fees you are charged are justified by the value it offers you.

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