How to choose your own super investments in four steps

Fortunately, if you want more of a say in how your super is invested, you don’t need to be an expert like Warren Buffet. You just need to work out for how long you need to invest, what your risk tolerance is, and how involved you want to be. From here, you can decide which investments for your super are right for you.

You’re already an investor because of super

Unlike a savings account, super lets working Australians invest their money for decades at a time including in local and international investment markets. That’s right, with super, you’re an investor already, likely with assets in Australian companies such as Woolworths, BHP, and international companies like Apple or Amazon^.

However, there are over 14 million super accounts with a ‘default’ investment strategy# which means, an investment choice has not been made. In fact, 67 per cent of Australians don’t know how their super is invested and leave it up to their fund to decide for them.##

Do you want more of an active role in choosing investment option(s) that make up your super?

Follow the steps below and you'll be well on your way.

Important: Before you start, brush up on some key investment terms

Why? Well, knowing some key terms can help you have more confidence when you make decisions about your super.

And don’t worry. We aren’t suggesting you learn it all in one go! Here are a few of the most common terms to get you started.

Assets, and asset classes

‘Assets’ are types of investments which can either increase or decrease in value over time. Examples could include full or part ownership in a property or company, bonds, or cash.

‘Asset classes’ are categories of investments that have similar characteristics such as shares, bonds, property, infrastructure, and commodities.

Risk, loss, and return

‘Risk’ means the potential of an asset’s value to go down (‘loss’) or up (‘return’) over time.

Growth assets like shares, have greater return potential over the long term but carry higher risk of loss in the short term.

Defensive assets like cash, carry lower levels of risk of loss but tend to produce more conservative returns.

Risk tolerance

‘Risk tolerance’ means the degree to which an individual is willing to accept the potential of losing money in their investments in the short term, or not wanting to accept loss at all. People usually land somewhere in between these two extremes. An example of a high-risk investor could be someone with a large majority of their super in growth assets (like Australian shares).

Such an investor is willing to tolerate investment losses during periods of market volatility and will usually stay invested in those assets given their likelihood of a longer-term reward – as markets tend to rebound following periods of volatility.

Diversification

Diversification' is a concept that means not to place all your eggs in one basket but rather, spread the risk across different asset classes.

This is because assets with different risk profiles will perform differently (some may lose value while others gain value) at the same time. 

Bear and bull markets

When economists or the media refer to ‘bear and/or bull markets’, remember this: a bear strikes down on its prey (meaning markets are going down), and a bull throws its prey up into the air (meaning markets are going up).

In investment terms, these types of markets indicate the length of time returns are generally negative (a bear market) or positive (a bull market).

Did you know?

Political and economic events, or even global pandemics can see investors lose confidence. These events sometimes cause investors to sell off assets that are falling in value, and in doing so they immediately crystallise their losses. In periods of market volatility, riskier assets like property and shares tend to take more of a beating over less-risky assets like cash or fixed interest.

1. Decide for how long you need to invest (and how long you want your money to last)

The choices you make for your super over the course of your working life (and beyond) can impact the amount of money you have in retirement. Understanding your life expectancy can also help you determine how long you might want your super to last.

Generally, the younger you are, the ‘riskier’ your investments could potentially be, as you typically have more time to recoup losses and benefit from the rebound as a result of a market downturn. And conversely – if you’re closer to retirement you might not have as much time to contribute to super and/or recover from market downturns.

The average life expectancy in Australia is almost 84 years of age*. In addition, ABS modelling from the Australian Bureau of Statistics (ABS) suggests that if people born in 2001 reach the age of 65, males may live until they’re 94, and females until they’re 97**.

So, before you take the next step in working out your risk tolerance, it’s important to understand for how long you will need to invest, and potentially how long you might want your money to last throughout retirement. This can help you determine the level of growth versus  defensive assets you might want to invest in with your super investments.

2. Work out your risk tolerance

Some people who see short-term market volatility as permanent loss, might pull out of growth assets, and switch to defensive assets. Others hold steady and benefit from market recovery. Both choices represent different tolerance levels towards risk.

Remember that your risk tolerance is the level to which you’re willing to accept the potential of loss in the short term. But all investments carry a degree of risk. 

Here are some tips to help you find your own risk tolerance

  • Do you have enough time left in your working life to offset any losses by new gains? If so, growth assets may make sense.
  • Can you afford to rebuild your balance? If not, de-risking as you wind down work may make sense.
  • Is the preservation of your money a priority? If so, more defensive assets may suit.
  • Do you need to continue to invest after retirement? Retirement isn’t the end of your investing. The average life expectancy in Australia is almost 84 years of age*, meaning at 67 you could invest for another 17 years or more.

Understanding and reviewing your super through a risk lens can be rewarding. It’s worth considering only taking on levels of risk that you’re comfortable with and remember, you can always change this at any time.

3. Decide how involved you want to be

Now that you know for how long you need to invest and what your risk tolerance is, the next step is to work out how involved you want to be with your super.

Super is a great way to begin or continue your journey in investing because it’s structured in a way that lets you be as hands-off, or as hands-on as you like, or somewhere in between.

Whatever you decide, it’s always a good idea to regularly check in with your investment choices to ensure they’re meeting your objectives.

Investment selection Type of super account Description
No choice MySuper Requires little or no involvement.
   
MySuper offers a default investment option – often ‘balanced’ or ‘lifecycle’/’lifestage’ – that is chosen and managed for you by the super fund.   
Limited choice Pre-mixed options

Super funds typically offer a menu of pre-mixed investment options usually classified by risk, e.g. ‘defensive’, ‘balanced’, and ‘growth’.

This might suit those who know their risk tolerance.

Once chosen, the super fund will manage the option.

Full choice Full selection from menu    Super funds often have a menu of investments, giving you the ability to choose your own investment strategy, and what your return and risk goals are.
   
The super fund will still manage the individual investment options, but you can have full choice over your investment strategy.   

4. Choose your own super investments with more confidence

Great news. Now you know...

  • For how long you need to invest (and how long you might want your super to last).

  • What to consider when working out what tolerance for risk you may have.

  • The level of involvement you want in your super.

What’s next?

You’re all set to go and select the investment options that align to your preferences. 

Look at what you’re invested in today, and whether your investments are already aligned to your risk tolerance and investment time horizon, and if it doesn’t align, then you may wish to change your options. 

If you choose to change your super investments, your super fund is likely to have a fund fact sheet and other standard information about each of the investment assets.

Other things might want to look at include your own investment preferences (for example, you may be interested in sustainable investments), your target retirement age, your current account balance, and perhaps your personal values, for example screening out controversial investments like tobacco or gambling.

Only take on levels of risk you're comfortable with and remember – you can always change your investments at any time.

You may also wish to seek professional financial advice to help tailor your choices to align with your personal situation.

If you’re a BT member

If your super is with BT, one of the most important things you can do is to sign in to your account. 

There you will be able to check in with your super, see what countries and companies you’re invested in, understand how your current investments are performing, explore other options available to you, and change or update your investments if you choose.

You’ll see that each option you look at will have its own fact sheet, containing important information that can help you make an informed choice.

How to sign in to your account 

BT Super and BT Super for Life (BT Panorama users)

You can sign in to your account via the BT Panorama App, or at bt.com.au/btsuperportal, or via your Westpac Online Banking.

Watch our video on how to log in to your BT super account.

BT Super for Life (via online banking)

You can sign in to your account via your Westpac, St.George, Bank of Melbourne or BankSA online banking.

You might also be interested in

Our investment check-in allows you to review your investments so you can make an informed decision about your super. It only takes 5 minutes.

Investing your super: Tips and tools webinar 

Award-winning financial adviser Kate McCallum joins Melinda Howes, Managing Director Superannuation, for our latest member webinar on 9 December 2021.

Diversifying your portfolio across multiple investments can be a valuable strategy to help to lower overall risk and potentially improve long term returns.
Our Risk Profiler may help you better understand your ability, willingness and knowledge of investment risk – so you might feel more confident in knowing what is the best fit for your circumstances.

Watch our video about how you can see, and learn how to change where your super is invested in your BT super account.

Understand and compare the performance of BT super investment options.
Managing your super investments is a privilege and a responsibility that we take seriously. At BT, we consider some key factors that help inform the decisions we make, so members can have the confidence that their money is in good hands.

^ Investment examples are intended for illustrative purposes only, yet are examples of investments within the 1970s BT Lifestage investment option as at 15 November 2021. 

# Quarterly superannuation performance statistics highlights – June 2021 – Australian Prudential Regulation Authority. 

## Russell Investments – Australians in the dark on super investments as COVID-19 hits retirement savings, May 2020.

* Macrotrends.net/countries/AUS/Australia/life-expectancy.

** Australian Bureau of Statistics https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4125.0main+features3110Feb%202014.

 

The information is prepared by BT Funds Management Limited ABN 63 002 916 458 (BTFM) the trustee of BT Super for Life, BT Super for Life Westpac Group Plan and BT Super part of the superannuation fund Retirement Wrap ABN 39 827 542 991. 

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