How your super is invested
Understanding where and how your money is and can be invested can empower you to make smarter choices today to create a better future. Find out about how super investments work to help you take control of your super today.
Some people think about super as a single asset, but it’s actually made up of a number of 'asset classes'. And within those asset classes are your investment options.
Types of asset classes
There are two key types of asset classes
- Defensive – cash and fixed interest, focused on generating income
- Growth – property, equities, focused on capital growth and income
When deciding on an investment option, it might be helpful to understand the different levels of risk and returns associated with the different asset classes.
Some assets carry a higher level of investment risk than others - these are known as growth assets (e.g. shares and property). Those that are more stable are called defensive assets (e.g. cash and fixed interest).
Super fund risk and returns
- Cash - deposits in a bank, short-term loan securities and other similar investments. Considered low risk with a corresponding expectation of low returns.
- Fixed interest - usually a loan to a government or business where a fixed rate and loan length are agreed to in advance. It’s a moderate risk investment. Generally less risky than property and shares over the short term, but also expected to provide a lower level of return over a longer period.
- Property - an investment in property or developments, either directly or through property trusts. Moderate to high risk investment, due to reliance on economic factors, location and quality. Has a corresponding level of moderate to high expected returns.
- Shares - investments in overseas companies. Similar to Australian shares. Generally the expected return is high over the long term, but the risk is greater.
By spreading your investment among different asset classes (also known as diversification), you can potentially reduce the overall level of risk in your portfolio. Generally, it's not possible to diversify all risk but spreading your investment over a mix of assets can help smooth out the ups and downs of an investment.
The performance of the investment option/asset class you choose will impact your final superannuation balance and how much you have when you retire. The performance of a fund depends on the investment options available and their risk profile.
Things to think about
Here’s some things to think about:
- Look at the performance of your fund, and the funds you might like to move to, so you can to evaluate the performance of the investment options over time.
- Check performance regularly as your needs change. For example, as you get closer to retirement you may want to be invested in assets that have less risk and lower growth but are more stable.
- Performance can be hard to judge, especially because superannuation is a long-term investment. But if you’re unhappy with the performance of your super, you might need to rethink your investment strategy and options. It is also important to keep in mind that past performance is no guarantee of future performance.
Compare 'like with like'
Make sure you’re comparing your current investment options with similar options. For example, don’t compare a cash investment option with international shares.
Make sure the performance results you compare relate to the same periods – for example, July to June results would be different from January to December results.
Take a long-term view
Superannuation is a long-term investment. Performance can sway in the short term so consider at least a five year time frame when checking performance, as this tends to give more telling results. But keep in mind that past performance is no guarantee of future performance either.
Review the performance of Virgin Money Super.
Units are the way we work out how much your superannuation is worth.
How a unit price is calculated
Unit price = the total value of assets in the investment option less fees, costs & taxes/the number of units issued in the investment options.
- Unit prices are calculated daily, based on the latest available market price, so they may fluctuate from day to day.
- Your account balance is then calculated by multiplying the number of units you have by the latest unit price (at any particular time).
- Each investment option has a different unit price, because they grow at different rates. So it’s normal for the unit prices to rise and fall.
What does this mean for your money?
When you invest in Virgin Money Super, you don’t buy actual assets - instead, the Trustee allocates you a number of units in the asset class or investment option based on the unit price on that day.
As you continue to invest money you buy new units based on the unit price of that day and so on.
Unit prices for all Virgin Money Super products are available to members from within their online account. We’re not suggesting you check the unit price every day. But it is important you understand how the unit price affects the performance of your investments to help you make informed decisions.
Find out more about the performance of this fund.
Superannuation funds will usually give you a choice between investment options. When choosing, you might like to consider the level of risk you’d be comfortable with.
If an investment option carries a higher level of risk, it means you generally have the potential to see higher returns over the long term. It's important to note that investment options with a higher level of risk also have a higher potential to experience negative returns.
Types of risk
There are different types of risk that can apply to superannuation funds, they are:
All investments have the potential for fluctuating returns. Generally, the higher the risk, the higher the return. However the higher the risk, the higher the probability is for a negative return.
This should be your key focus when assessing funds.
This includes universal factors such as economic cycles, government policy, interest rates and inflation. Changes in these factors may result in dramatic increases or decreases in market valuations.
The risk that movements in foreign currency will affect the domestic value of overseas investments.
Changes in legislation (such as superannuation and taxation laws) may affect your investment.
The risk of your fund terminating.
The extent to which investments can be converted into cash or other liquid securities without suffering a substantial reduction in value. This risk may arise in circumstances where in order to liquidate an asset quickly, it may be necessary to sell that asset at a substantial discount and have a negative impact on the overall performance of the investment.
To understand the investment risk and growth prospects that can be expected from each asset class within Virgin Money Super, check out our investments. This is a great way to help you understand how your investments could build over time.