Superannuation investment options
When you select a super fund, you're essentially deciding which company or organisation will manage your money. However, each fund also offers you some degree of personal control through the investment options they offer.
So what are your options? Let’s break down the most common.
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What is a superannuation investment option?
If the ‘superannuation’ fund is the company or organisation that manages your super, your investment options are the various types of asset classes and investment mixes the fund offers you. This is how we like to visualise the relationship:
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Generally speaking, a fund with a broad palette of options is attractive because it lets you mix, match and shift gears as your financial goals evolve - without ever leaving the fund.
Of course, you’ll have to weigh its breadth of options against other factors like performance, fees and some intangibles like customer service and perks.
Common superannuation investment options
Choosing your investments within your fund doesn't mean you have to make every decision solo. Yes, some options grant you the flexibility to manage the breakdown of every asset. But there are also premixed options where fund managers handle the strategy for you. Let’s look at some of the most common investment options:
Premixed/default investment options
The most common investment options in super are premixed options, where the fund managers invest your money into a range of diverse assets, like stocks, bonds and property. These assets are allocated in a way that aligns with your financial goals and risk tolerance.
| 💡 Risk vs. reward Riskier investments often come with the promise of higher rewards. Imagine putting $1,000 into Facebook in its early days—you’d be looking at substantial returns today. But if that same $1,000 had gone into a company like MySpace, it would have disappeared along with that site’s fading relevance. Now, picture that $1,000 in a basic savings account instead. It wouldn’t have multiplied into millions, but it also wouldn’t have disappeared. Your money would be safe, growing steadily, albeit modestly, over the years. This balance between risk and reward is central to super investment options as well. Some strategies aim for high stakes with high potential returns, while others focus on stability and security, offering lower returns but greater peace of mind—leaving you to decide where on the spectrum you feel most comfortable. |
Generally, these investment options are actively managed by the fund, with fund managers closely monitoring market conditions and making strategic buy and sell decisions to achieve desired returns while maintaining the option’s risk/reward balance.
The most common pre-mixed options will take one of three main strategies as it relates to its risk vs reward profile:
Growth option
A premixed growth option is all about aiming for higher returns. To do this, it leans heavily on growth-oriented assets like domestic and international shares, property, and sometimes alternatives like infrastructure or private equity. These options typically have a smaller allocation to safer investments like cash and bods, just to provide a modicum of stability.
The main goal here is to maximise capital growth over the long term. However, it’s worth keeping in mind that this approach comes with the likelihood of short-term losses, thanks to market ups and downs.
Growth options are generally best suited for:
- Younger investors with time on their side, who can handle the market’s fluctuations.
- Those with a higher tolerance for risk, willing to accept some short-term losses in exchange for the potential of long-term gains.
- Investors focused on significantly growing their super balance, aiming for a more substantial retirement fund.
Balanced option
A premixed balanced option is designed to find a sweet spot between growth and stability. It spreads your investment across growth assets like shares and property, but also includes safer investments like bonds and cash to help smooth out the ride.
The aim here is to achieve steady growth over time, with fewer bumps along the way compared to a more aggressive growth option. While you still get the potential for gains, the inclusion of more stable assets helps protect your investment during market downturns.
Balanced options are generally a good fit for:
- Investors who want a mix of growth and stability, without going all-in on high-risk assets.
- Those who prefer a more moderate approach, aiming for growth while keeping potential losses in check.
- People who are getting closer to retirement and want to safeguard their savings while still looking for some growth.
Conservative option
A conservative option is all about keeping your money safe and steady. Instead of going for high-risk, high-reward investments, this approach focuses on low-risk assets like bonds, cash, and term deposits. The idea is to protect what you’ve built and grow it slowly over time.
With a conservative option, you won’t see big jumps in your balance, but you also won’t face big drops. It’s designed to give you a smoother, more predictable experience, especially when markets get shaky.
Conservative options are a good fit for:
- Investors who prefer stability and want to avoid the ups and downs of the market.
- Those getting close to retirement who want to keep their savings secure.
- Anyone who doesn’t like taking risks and is happy with slow, steady growth.
This option is perfect if you’re more focused on keeping what you have and watching it grow gradually, without the stress of market swings.
| 💡 What is a lifecycle investment option? A common retirement planning strategy is to start with riskier growth options when you’re young, gradually shifting to safer, more stable investments as you approach retirement. This helps you maximise growth early on while reducing risk as you near retirement. If that’s the strategy you want to follow, you can either manage the shifts yourself or let the fund handle it for you. If your fund offers a lifecycle investment option, it will typically start you in one of their growth-focused options while you're younger. As you reach certain age milestones, the fund will automatically adjust your investments, gradually moving them into safer, more stable options over time. |
Other types of pre-mixed options
You can find premixed options positioned all along the conservative-to-growth spectrum. For instance, besides the standard growth, balanced, and conservative options, you might also see an ultra-conservative option or a balanced option with a bit more emphasis on growth.
There are also more passively managed versions of balanced, growth and conservative options that achieve the desired risk-reward profile by tracking index funds with similar objectives.
Customised super investment options
If you want a bit more say in how your assets are allocated, many funds offer options that let you customise your own investment mix. Here are a couple ways they do that:
Choose your own asset mix
If your fund offers this option, you can decide how your super is spread across different asset types, like shares, bonds, property, or cash. However, you’re not picking individual stocks or assets directly. Instead, you’re telling the fund, "I want X% of my money in stocks, Y% in real estate," and so on.
This approach gives you more direct control over how your investments are allocated, but there's still a level of active management by the fund, who will select what they believe are the best investments within those asset classes.
The level of risk and reward depends on how you allocate your funds. For example, if you have more in stocks than in cash, you'll be taking on higher risk, and vice versa.
Self-directed investing
While not as common, some super funds are now allowing members to buy and sell assets like stocks directly. You’ll have access to a trading platform provided by the fund, where you can use your super balance to actively invest in assets like shares, exchange traded funds (ETFs), listed investment companies (LICs) and term deposits.
This shifts the active management responsibilities from the fund, to you.
| ❗ Before you decide to customise your strategy If you decide to take a customised approach, it’s important to be confident in your abilities to manage your own investments, and to check in with a financial advisor if you’re unsure. |
Special types of investment options
There are also some types of investment options that don’t fall neatly into the above categories because they work at a broader level. Rather than directly focusing on the mix of assets or the risk-reward balance, these options set overarching standards or principles that influence how those elements are applied.
MySuper investment option
This label indicates whether a super fund meets the government's standards to be the default option for employees who don’t choose their own super. The government aims to prevent these employees’ money from being placed into high-fee investment options without their consent.
As a result, MySuper products are typically premixed options that are balanced or growth-oriented. They’re designed to be a middle-ground choice—not too risky, not too conservative, and with reasonable fees.
Ethical investment options
Ethical investment options can come in the form of pre-mixed investments at various points along the risk-reward spectrum or as single-asset class options.
If a traditional super fund offers ethical investments, it's usually in the form of one or two premixed ethical options that sit alongside their other offerings. For example, Australian Retirement Trust isn’t exclusively an ethical super fund, but they do offer a premixed investment option called ‘Socially Conscious Balanced,’ which is a balance premixed option that follows an ethical framework.
However there are also funds that focus entirely on ethical investments, where you'll typically find a broader range of choices. These might include a variety of premixed options from balanced to growth, as well as single-asset class options where you can tailor your own mix—all of which align with an ethical investment framework.
Bottom line
When you decide where to put your super, it’s not just about finding the right ‘fund’, it’s about finding the right fund that offers an array of investment options that suit your retirement strategy.
Just ensure you consider the level of control you want over your investments, the balance of risk and reward that fits your comfort level, and any overarching principles—like ethical investing—that are important to you.
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