Most Australians have a superannuation fund, whether it’s self-managed or through a retail or industry provider. It’s a key way to save for retirement, but how is your super invested? Let’s explore which assets should be included in your super fund to maximize your wealth over time.
Defensive vs. Growth Assets: What’s the Difference?
If you’re running a self-managed super fund (SMSF), then you’re in control – you decide where the money goes. But if you’re with a retail or industry fund, your fund manager will likely assign you to a “balanced” portfolio by default. This is the typical go-to for most fund providers and usually splits your money between safer, more defensive assets and riskier, higher-growth ones.
Now, let’s talk about defensive versus growth assets. On the safe side of things, you’ve got cash investments and government bonds. Think of these like term deposits or US Treasuries—solid, low-risk, and pretty much guaranteed to preserve your capital. But, and it’s a big but, these defensive assets aren’t likely to make you rich. They can provide security, but not a whole lot of growth.
On the flip side, you’ve got growth assets like shares and property. These are riskier, no doubt. They can be volatile, subject to market swings, and there’s no guarantee you’ll make a profit. But here’s the catch: over the long term, these assets tend to provide the best returns. That’s why balanced funds typically mix the two – about 60% growth assets and 40% defensive assets.
Why More Growth Assets Might Be Right for You
Here’s where things get interesting, though: if you’ve got more than ten years until retirement, sticking too heavily to the “balanced” approach might not be your best bet. Sure, shares are volatile – we’ve all seen the crashes, the market corrections, and the dips. But historically, the stock market tends to recover from these crashes fairly quickly. In other words, if you’re not about to retire, there’s a good chance your super is better off invested mostly in growth assets.
So, let’s be real here: if you’re aiming for a happy retirement, the goal should be to have as much capital in your super as possible by the time you’re ready to retire. The more your super grows, the more flexibility you’ll have down the line. And if you’re still a decade or more away from retiring, leaning into shares and other high-growth assets might be a good way to supercharge your super balance.
Adjusting Your Portfolio as You Approach Retirement
Of course, this is all a bit of a generalization. Everyone’s situation is different, and your needs might vary depending on your personal goals, risk tolerance, and financial circumstances. So, before making any changes to your super, it’s always a good idea to have a chat with a financial adviser who can guide you based on your unique situation.
But one thing’s clear: a “balanced” superannuation strategy might not be the best fit for everyone. Don’t be afraid to reassess your approach and adjust it to match your long-term goals. A little tweak now could make a big difference to how much wealth you’re able to build for a comfortable retirement.
