Understanding investments in your super

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An Introduction To Super and Investment

Rather than spout off some money-stuff-jargon that will render your brain frozen with overwhelm, below, we’ve typed up a typical conversation between a current Child Care Super member who is looking to learn more about how super works - let’s call her Claire (aka, your FBF, financial best friend) - and a wonderful, Child Care Super support team member, who we’ll call Gen.

Claire: Hi, Gen! Thanks for speaking with me today.

Gen: My pleasure, Claire! How can I help?

Claire: Can you please help me understand how investments are made using my super? I'd really like to know what happens to my money when it hits my super fund.

Gen: Of course, your money which includes contributions made by your employer, yourself, or your partner (if you have one), is pooled with other members and invested into things (otherwise referred to as assets) like shares, property, government bonds and cash deposits.

Claire: Got it! How are investment assets chosen?

Gen: You can either choose the investment assets yourself or your super fund - Guild - will choose the most appropriate option for you depending on your age.

Claire: Why is age important in super?

Gen:  Age is important, because the longer you have until your retirement the more you can withstand risk. You should take your current age and expected retirement age into consideration when setting your super goals. The longer the time between today and your retirement, generally speaking, the higher the level of risk your portfolio can withstand.

Claire: What are the different risks that can affect my investments?

Gen: Good question. Each asset has a different level of risk – assets with higher risk – like shares - can make more money (bigger returns), but have a greater risk of loss. Assets with lower risk, tend to make less money (lower returns) but have a lower risk of falling in value.

It is important to understand that investments exist on a risk spectrum. The higher the return, the higher the risk. Your comfort with different levels of risk is crucial in determining what kind of assets you can, and should, invest in.

Claire: OK, that’s a good way to think about it.

Gen: Depending on the markets, (and what’s happening in the world), these investments will either make money or lose money. This means your account balance will either grow or drop in value. It is good to understand that markets are cyclical – meaning they go down, but they also go up. Any changes in those markets may affect your investment.

Claire: So even taking into consideration the contributions put into my super by my employer and by me, I could potentially end up with more, or sometimes less in my super account?

Gen: That’s right. You should always be aware if something goes down, but it's also important to recognise when it goes up. The key is not to focus on the day-to-day movement but whether you're trending in the right direction and on track for your goals.

Claire: So when choosing the best investments for my super what are the sort of things should I be thinking about?

Gen: Wow another great question, factors like:

  1. how long you’re investing for
  2. what investment returns you need to meet your retirement savings goals
  3. how hands-on you want to be when managing your super
  4. how comfortable you are with investment risk

Claire: Can Child Care Super help me choose how to invest?

Gen: Sure can, but first you should decide how hands-on you want to be with your investments. Choosing the right investment is important. It can affect how much your savings grow and how long they last. You can decide to either leave your investment choice to us or choose and manage your own.

Our Member Services Team is there to give you general advice about Child Care Super investment options. Please contact them on 1800 060 215 .

.Claire: Thanks you’ve been so helpful, any last words of wisdom?

Gen: Superannuation helps you build your retirement savings so investing in the right mix of assets and keeping a long-term view is a smart strategy. Don’t forget to watch out for more articles just like this to help keep you super savvy.