Your superannuation is all about investing for the future, and knowing how to invest it can be tricky.
If you are quite new to the financial world, but would love to get stuck into controlling your own super, here is some information about the most common asset classes offered by financial advisors and superannuation providers, including Virgin Super.
Cash and fixed interest
Cash and fixed interest investments are widely considered the safest options, and are considered ‘income style’ investments, though conversely they offer a much slower growth rate than ‘growth style’ investments.
Cash investments involve investing in deposits or deposit-like products issued by banks and other financial institutions. Your money accrues interest over the time you have it invested, which is what makes it grow. Interest rates are largely shaped by the Australian Official Cash Rate, which was lowered to 2.25% on February 4, 2015.
Fixed interest investments, on the other hand, involve lending money to a bank or other institution, who then agree to pay it back within a set time period. Interest is accrued over this same timeframe, and is paid at regular intervals.
Both domestic Australian and international shares form another commonly used Asset Class, and are considered a ‘growth style’ investment.
Purchasing a share is effectively like purchasing part ownership of a company. This investment option has the potential to net you a higher growth rate over time, but is also more risky.
Owning shares means you benefit from the success and profit of a company, though with the risk of also sharing in its failure should worst come to worst. You can minimise the risk, however, by investing in a variety of shares and keeping an eye on the long term – not the daily and monthly movements of a company.
Property sits somewhere between fixed interest and shares, and has characteristics of both ‘growth’ and ‘income’ style investments. It offers reasonable growth, though comes with a certain amount of uncertainty as the property market changes, and provides relatively reliable rental income.
Generally property investment is a mixture of either residential, commercial, industrial or retail properties. These could include shopping malls, office blocks and other similar types of buildings. By investing in property through your superannuation fund, you are letting your fund manager do the hard work of deciphering the best property markets in which to invest.
With our Virgin Super Plus, members have the option to Mix and Match between a number of Asset Classes. You can put all of your eggs in one basket, or spread your money out across a variety of investment types.
Both Virgin Super Plus and Virgin Super Essentials include the LifeStage Tracker® Option. This is a tool that invests and allocates your money depending on your risk appetite and age. There are two types of LifeStage Tracker® options available to Virgin Super Plus customers.
- Balanced: The Balanced variant of this program aims to balance the need for growth investments with an allocation to income investments suitable for your age. The asset mix percentages begin higher when you’re under 40, with more money being allocated to higher-growth Asset Classes. As you grow older, these percentages change to become safer by investing in more Cash and Fixed Interest assets, protecting your fund as you near retirement.
- Aggressive: Alternatively, the Aggressive variant of LifeStage Tracker is for people looking to supercharge their super, providing access to higher levels of growth investments across their lifestages. All of your savings are allocated to high-growth investments while you are under 40 (compared to 83 per cent in Balanced), and then reduce at a slower rate as you age. Though this is more risky, it aims to yield higher growth for longer.
Both the Balanced and Aggressive strategies are available to Virgin Super Plus customers, while Virgin Super Essentials customers have access to the Balanced option only.
Remember that with any decision about super or investments, it’s important to consider your needs, objectives and speak to a professional advisor before making a decision.
How are you investing super to reach your retirement goals?