In a nutshell: The fundamentals of
how your super is invested

How super is invested?

Super is invested across a range of different types of assets, grouped into classes such as:

• Shares – where you own a share of a company and therefore a share in any profit or loss.
• Property – where you could earn money from rental income and/or rising property values
• Bonds – a bond is a loan, but the money is borrowed from investors to borrowers, such as companies or governments. Income comes from interest paid on the bond.
• Cash – money in a bank account that receives interest.

Risk and return – why do you need a mix of assets?

Different asset classes have different potential for delivering high returns. Whilst we all want high returns in our super, there’s a catch! With higher return potential, we also have to accept higher risks, especially in the short term.

• Higher risk means there’s a chance to make more money (a higher return), but there’s also a higher risk of losing money. Shares are an example of a higher risk asset, also known as a growth asset.
• Lower risk means maybe not making as much money (a lower return), but there’s a lower risk of losing money. Cash is an example of a lower risk asset, also known as a defensive asset.
• Intermediate risk means some assets exhibit characteristics of both growth and defensive assets, like property and infrastructure.

Investment options and risk profiles

When working out your risk profile, it’s important to note that “risky” assets like shares have prices that may fluctuate heavily in the short term. Over the long term (like investing in super), the impact of these short term movements could even out. This means that when we talk about risk for investing in super, we need to look at how long you have before you retire.

This is why younger people often invest in options that have a higher proportion of growth assets, because the short term fluctuations and risk won’t have as much impact on the final balance as they might for a 60 year old, because the balance has more time to recover. As a result, it’s important to work out your level of risk tolerance before investing.

How does Rest invest your super?

Here at Rest, we invest across different investment markets using a range of asset classes and investment strategies to grow your retirement savings. To give you more control over how your super is invested, you can choose from several different investment options. If you don’t choose an investment option, your super will be invested in our default option, Growth.

Read more about how we invest to grow your retirement savings. 

What’s right for you

To support you in making this decision, here are five things to consider:

1. How comfortable you are with risk? Are you keen to ride the waves of market volatility, or do you feel more comfortable with a ‘slow and steady’ approach?
2. How close to retirement you are? As mentioned, the further away you are from retirement, the higher the risk you may be able to take, as you could weather any short-term market fluctuations. If retirement is around the corner, you might want to be more conservative to reduce the risk of your balance going down just before you stop working.
3. Your retirement saving goals. Knowing whether your super balance is on track for the future, or in need of a boost, may influence how much risk you’re willing to take.
4. Your values. You may be able to choose investment options that are more tailored to your values, like sustainability, or supporting Australian-owned businesses.
5. How hands-on you want to be when managing your super. Do you want to take control and actively explore different investment mixes, or make a choice and check in on your progress?