Your super investment choices can make a big difference

Most Australians understand the importance of choosing the right superannuation fund. But what’s not as well known is the importance of choosing the right investment option.

Over the course of a career, the difference between choosing a fund with lower fees compared to a fund with higher fees could add up to tens of thousands of dollars.

It’s not enough, though, just to sign up with a competitive fund. You also have to select a suitable investment option. Again, over the course of a career, the difference between a more-profitable and less-profitable option could be tens of thousands of dollars.

What are superannuation investment options?

Most super funds let you choose from a range of different investment styles, or options. 

Often, there will be several options at different points on the risk spectrum:

• Lower-risk options tend to offer lower volatility and lower returns over the long term
• Higher-risk options tend to offer higher volatility and higher returns over the long term
  

For example, Energy Super, which is one of the many different super funds in Australia, allows new members to pick from 11 different investment options.

Some of those options, in order from lower-risk to higher-risk, include:

• Cash Enhanced – For risk-averse investors who want a consistent return
• Stable – For risk-averse investors willing to accept more risk in exchange for a higher return
• MySuper (default option) – For return-seeking investors who are willing to take moderate risks
• Growth – For return-seeking investors willing to accept more risk in exchange for a higher return

Over the past five financial years, Energy Super’s higher-risk investment options did, indeed, end up delivering higher returns. If you’d invested $10,000 on 1 July 2014, here’s how much you would’ve had in your account on 30 June 2019:

Source: Energy Super

Why you should regularly compare superannuation

Choosing super funds and super investment options aren’t one-and-done activities.

With super funds, it’s a good idea to compare your fund against the market every few years, so you can see whether your fund is still delivering value for money. If you find a better alternative, switching super funds is straightforward.

With investment options, many experts recommend that you change your risk profile as you age:

• Younger people might want to take more risk, because they have more time to bounce back from market corrections
• Older people might want to take less risk, because they have less time to bounce back from market corrections

Compare super funds

Provider

Annual fee at $50k balance1yr return3yr return5yr return

$457

13.9%

5.6%

8.2%

More details

High Growth (Lifecycle investment)

• Promoted
• Industry
• Life insurance
• TPD insurance
• Income protection insurance

$507

13.4%

7.3%

9.0%

More details

Lifecycle Investment - High Growth

• Promoted
• Industry
• Life insurance
• TPD insurance
• Income protection insurance

$280

16.2%

More details

Lifecycle Age 47 & under

• Promoted
• Retail
• Life insurance
• TPD insurance
• Income protection insurance

$407

14.5%

5.9%

11.8%

Moderately Aggressive

• Retail

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