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What Type Of Investments Does Your Super Fund Prioritise?

For any contributions, that are made into your super fund (be that Super Guarantee contributions or any additional and voluntary contributions), your superannuation fund provider will typically invest your super savings over the course of your working life, so you can hopefully retire comfortably.

But how do they ensure that your funds do not simply stagnate once they are in the account? How do they maximise the profit from those contributions into your retirement funding?

In general, your superannuation providers invest the money that you place into your super fund into a number of investment options.

These options may vary depending on your provider’s preferences but could include options that are known as high growth, diversified, balanced or cash, or a mix of these investment options.

High Growth 

Growth options deemed as high-growth investments aim for higher returns over the long term. This may however incur more significant losses when market conditions are volatile.

High-growth assets that may be invested in in these options may include shares, such as those in the Australian and international markets, which have a higher risk but a potentially greater return.

Balanced 

Balanced options don’t aim to perform as well as high-growth options over the long turn – however, the losses that may be incurred through their investments are more likely to be smaller when the market falters or becomes volatile .

Typically, investments in balanced options might look like:

  • 50% or thereabouts in growth assets (such as shares)
  • 50% or so in more defensive assets (which include investments such as bonds and cash)

(It is important when comparing returns that you compare apples with apples – some balanced funds may have more in growth assets and less in defensive assets – say 70%/30%.  This is a more risky portfolio but you would also expect higher long term returns)

Conservative 

Conservative investment options have a primary aim of reducing the risk of market volatility and therefore may generate lower returns as the invested assets are generally more stable.

Typical investments into assets for conservative options may look like:

  • 35% in growth assets
  • 65% or so in defensive assets.

Conservative options generally aim to reduce the risk of market volatility and therefore may generate lower returns. They typically invest around 35% in growth assets like shares, with the rest in more defensive assets like bonds and cash.

Cash 

Cash investment options aim to generate relatively lower but more stable returns to safeguard the money that has been accumulated in your account. These options may include investing exclusively in deposit-taking institutions (such as banks, building societies and credit unions) or in other short-dated government or bank-issued securities.

These asset allocations in your super fund may differ according to your provider and the options available to your account type. It’s important to consider critical factors, such as the stage in your life that you’re currently at, your future plans and financial goals before choosing the investment option that’s the right fit for you and your fund.

If you’re young, you may have more time to ride out market highs and lows and therefore be willing to take on more risk in the hope of achieving greater returns. If you’re approaching retirement or getting closer to the age that you can access your super, you may be looking at more of a conservative approach.

Doing your research and understanding the risks that might be involved in changing or altering how your assets are located could make a difference to the returns that you generate and what your final super balance may be.

Regardless, if you are unsure where to invest your super please make sure you speak to a licensed financial adviser.  We can certainly help you in that area.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier