Level: Basic

An introduction to superannuation as an investment

While many people find super confusing, it helps to remember that super is simply money that you have earned, which is put aside to help you save for retirement. Super funds invest the money for you, with a view to grow it over your working life to increase the amount you have to retire with.
A golden egg and cogwheels

How is your super invested?

Your super fund automatically invests your superannuation contributions (made by either your employer or your own extra personal contributions) on your behalf. These contributions are invested in line with the investment option that has been selected.

You can either choose your investment option or, if you don’t wish to choose, most super funds, have a default investment option that you will go into. Rest's default investment option for super is Core Strategy.

If you want to decide how your super is invested, you can choose an investment option. Each option has different characteristics and carries a different level of risk. There are many factors to consider when choosing an investment option. You should seek advice if you are unsure which investment option is the best for your circumstances.

What does your super fund own?

The types of investments in your super account will be determined by your chosen investment option. For Rest members who do not make a selection, their super will automatically be placed in the Core Strategy. The Core Strategy invests in a diverse mix of assets such as Australian and overseas shares, property, cash, and more.

If you select an investment option which invests in shares, you are a shareholder (through your super) – so effectively a part owner. For example, you might own, through your super, part of a large Australian company, like a bank. Publicly owned companies work to make money for their shareholders, which means dividends (income) may be attributed to your super account if the company pays dividends to its shareholders from its profits.

If you’re invested in an investment option which includes infrastructure or property, you are an asset owner through your super. Your super might own part of an office building in Sydney, or a warehouse in Perth. Just like shares, your super account may be attributed rental income from those properties. 

Your super balance can go up and down

The value of your super assets can change over time. Sometimes the value of your super assets and therefore your total super balance will increase. At other times the value of your super assets and your total super balance will decrease. 

It’s important to remember that superannuation is generally a long-term investment. 

Things to consider if your super balance goes down

  • A decline in the value of your super investments indicates your assets are worth less (in dollar terms) at the current point in time. It doesn’t mean you own fewer assets. For example, you may own 100 shares in a company and while the price of those share may go up and down, you still own 100 shares.

  • Your super balance can decrease because of account transactions like withdrawals, taxes (taxes are paid on contributions and investment earnings), fees and/or insurance premiums.

  • You will still be attributed income from the assets you own, like profits (dividends) from shares.

  • If you choose to stay the course rather than switching to another investment option, the value of your assets may improve, and your balance may go back up again.

  • If you add money to your account when asset values are down, you’re effectively buying assets at a cheaper price — a bit like a sale!

  • Markets and asset values are not set in stone and move up and down regularly.

Rest takes great care to invest in good quality assets and minimise risk by diversifying your investments across many different assets (such as shares and bonds) and sectors (such as finance, agriculture and technology). Most options are also diversified across the world, so you aren’t exposed to the risks of any one country or region.

Investing for the long term

Your super account opens when you first start working and the super balance continues to grow throughout your lifetime through both contributions and investment returns.

Some years, investment returns will be negative depending on markets, economic conditions, and other global events. Generally, most members in Core Strategy would expect to see negative annual returns over a 20 year period of 4 to less than 6 times. But over the long haul, these bumps in the road are likely to level out so it may be best to stay the course and remember that super is a long investment journey. Once you get closer to retirement your investment timeframe can become shorter which might impact your approach to investing. Our financial advice service is always available to help with your specific situation if you need a little guidance.

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