What is Super? This is a commonly thought, but not often asked, question.
Superannuation is essentially a retirement savings scheme. It allows people to save for their retirement so that they can self-fund their retirement instead of relying entirely on the age pension. It works by contributing a part of your wage (10% minimum for employees) into an investment fund, which stays invested and grows until you retire. When you retire you can access these funds to replace your salary in order to pay for living expenses in retirement.
What Is My Super Invested In?
Within each investment option your funds are generally spread across a range of assets. The core assets are: Australian and international shares, property and infrastructure, Fixed interest and Cash. However, some investment options will be invested into just one asset class e.g. cash, Australian shares or Australian property.
What Type of Investment Option Should I Be In?
This depends on your individual circumstances and your risk tolerance for investments. Broadly speaking; shares, property & infrastructure are defined as growth assets whilst cash & fixed interest are defined as defensive assets. This is because over the long-term growth assets grow at a faster rate than defensive assets. However, the downside is they can be much more volatile in the short term.
Your Risk Profile
If you’re unsure as to whether to have more growth or defensive assets in your portfolio then you should assess your risk profile. This helps determine your risk tolerance for investments. In turn, this helps guide you to determine which type of investment option is best for you.
Choosing a Super Fund
If you understand the basics of super and what type of investment option you should be in, choosing a super fund is your next step.