Trustees of managed superannuation funds are responsible for managing the investment portfolios, so you, unless in a SMSF, need only be concerned with the choice or combinations of investment options to suit your personal circumstances. The options available will be set out in the fund’s Product Disclosure Statement (PDS), which should explain the nature of the underlying assets, and potential returns and risks. There is often a cost involved with switching from one portfolio to another. The most common investment portfolios offered by superannuation funds include:
Capital Guaranteed Investment Option
This investment option usually guarantees the return of net contributions plus interest, once credited to the account. The guarantee is made by the organisation offering the superannuation fund. The guarantee is only as good as the organisation providing it. Guaranteed options are now rarely offered.
Capital Stable/Capital Secure Investment Option
Money invested in this option is usually placed in investments that are ‘low’ risk (i.e. less volatile) assets, such as fixed interest, etc. but may have some exposure – up to about 30% - to growth assets. These assets can decrease in value. There are no guarantees offered.
Market Linked Investment Options
These options usually invest in more volatile assets such as shares (both Australian and overseas), property, futures etc. Many superannuation funds have different investment options within this class reflecting the percentage of exposure to the more volatile assets. Balanced, Managed and High Growth are among words used to describe these investment options and their volatility varies with the exposure to the above mentioned assets.
To find out more about your super, contact your fund. Taking the time to get to know your product options and effectively managing your super while it is in the accumulation phase can make a huge difference to the end balance when you reach retirement. The basic rule to follow is to match the risk of investments with an appropriate time frame. The goal is to maximise your returns to make the most out of your super.