How to Invest in Super

Invest strategy means how you would like to invest. Whether you want a diversified portfolio or not. What will be combination of growth, balanced, moderate, and conservative assets. Whether you can take risk or capital protection should be the goal.

The benefit of choosing diversified options is that super fund makes the investment mix decisions. If you are experienced and confident investor you may choose to mix asset class options.

You also need to understand the classification of growth, income or defensive by return and reward matrix to decide about investment options.

Growth assets are the assets which are supposed to grow in value relatively quickly and share of value increase in overall return is more than income. Income assets on the hand are like bonds which do not increase much in value but provide regular income. Let’s keep in mind here that the distinction is not black and white, and some assets may have both income stream and value increase.

The income assets are also called defensive assets as they are likely to not to fall in value much.

Normally more allocation to growth assets in portfolio means more chances of making money in the long run. But this also means more volatility and risk. Similarly, more income or defensive assets in the portfolio means that the return might be lower, and risks and volatility may also be lower.

Lately a new investment option is becoming popular because of its simplicity to understand. It is lifecycle investment option or simply put age-based options. The investment allocation is decided on the base of age of the participant. A young person can have a very growth-oriented portfolio as compared to someone nearing retirement.

It is also important to understand if the super fund requires to actually sell and re-invest while changing options or adjusts on the basis of whole portfolio as physically selling will incur cost and have tax impact.