Understand investment basics

Your super is your money, and it’s invested in things like shares and property, in what we call an “investment option”. 

When the value of these investments goes up or down, over time, so does your super balance. 

Investment options are choices you can make about the types of things you’re invested in.  

You can pick your own investment options by choosing one, or a mix of options, depending on how confident you are in choosing these options.  

When making a choice, you should consider the investment risk of the option, the returns (or money) you could make and whether it is appropriate for your circumstances.   

Or, like most of our members, you can leave the investment decisions to us. 

If you don’t make an investment choice, you’ll be invested in our My Super Lifecycle option, which is designed by investment experts to automatically adjust what you’re invested in to suit your age. 

When you’re younger, your money is invested in higher risk investment options to grow faster, but as you approach retirement, the level of investment risk is slowly reduced, to help safeguard your savings - so you retire with more.  

Not sure what you’re invested in? Just log in to your account online. 

To learn more about investment options, visit aware.com.au/basics

Investments can seem like a tricky subject, but understanding the basics is a good first step. We’ll start with how money in super grows. Next, our default investment option, MySuper Lifecycle, and the different investment options available to you at Aware Super. Later we’ll look at the importance of staying invested during times of market uncertainty. Let’s get started.

Money in super grows because it’s invested in things like the share market and property - and because you usually can’t access super until you retire, your money benefits from what’s called “compounding”.

With compounding, it’s not just your investments that can make money; the earnings you make on that money can also grow.

By the time you retire, around 50% of your super balance could be from your own contributions, and the other 50% from these compounded investment earnings.

Choosing investment options is about balancing the relationship between risk and growth potential. It’s also about matching your investment choices to your circumstances and needs over time.

Super is a long-term investment, and your investment priorities will likely change as you get older. To make the most of super, it’s important that your investments change with you. That’s where MySuper Lifecycle fits in. When you start receiving super, if you don’t make an investment choice, it’s invested by your super fund in what’s called the "default investment option".

At Aware Super, our default investment option is called MySuper Lifecycle, which is designed by investment experts to automatically adjust your investment mix to suit your age.
MySuper Lifecycle has three phases, Grow. Manage. And Enjoy.

From the time you open your super account, until you turn 56, your money is invested in the Grow phase . This phase of the lifecycle makes the most of your ability to grow your super and aims to maximise your returns over the long term. You’ll be invested in our High Growth Option and your investment mix will generally be higher-risk, because you’ll have time to ride out any market ups and downs.

When you turn 56, and enter what we call the Manage phase, we’ll begin making a series of yearly adjustments to your investment mix. As you approach retirement, risk is slowly reduced, to help safeguard your savings – to help you retire with more.

From age 65, you’ll move into the Enjoy stage. The lower risk Conservative Balanced option here helps to safeguard your retirement savings and provides you with a more stable ongoing return.

More than 85% of our super members are investing in MySuper Lifecycle. But if you want to be more involved in how your super is invested, you can choose from a range of investment options. The options you choose will depend on your investment goals and your comfort with each investment’s level of risk. Typically, higher risk investments can grow more, but that growth can be more uncertain in the short term. Lower risk investments tend to grow less, but steadily, over time.

At Aware Super, we offer single asset class investment options, which means one type of investment, like Australian shares, or property, or international shares or cash. We also offer diversified options, where different kinds of investments are mixed together into a single option. These options can reduce risk, by making it less likely that negative returns from one investment will impact the rest of your investments – put simply, it means that all your eggs aren’t in one basket. Our core diversified options are defensive, conservative, conservative balanced, balanced and high growth, and they have a range of risk and potential returns.

Now here’s a chart that shows how investment options with different risks performed over time. The line at the bottom shows the performance of the cash investment option. Cash is a lower risk investment, and this shows in its steady but slow progress. $100,000 invested in the cash option in 2013 was worth around $124,000 ten years later. Compare that to our Conservative Balanced option, which grew to around $176,000. And as you’ll see, that Conservative Balanced encountered some ups and downs along the way. Finally, our High Growth option, which climbed in value even more to around $224,000. You’ll notice the ups and downs are even bigger along the way here.

Choosing investment options is about balancing this relationship between risk and growth potential, which can change over time. More than 85% of our super members are investing in our MySuper Lifecycle option, and 15% choose their own investment options. When we invest – environmental, social and governance (or ESG) considerations, is part of our investment process for all investment options.

We also offer additional investment options for members who want greater certainty about the environmental and social impact of their investments.

Our Socially Conscious investment options limit or avoid certain industries and companies considered to have a highly adverse environmental or social impact. They are managed with specific restrictions and exclusions known as screens. You can read more about these in our PDS.

Super is a long-term investment and, like all long-term investments, there will be times when the markets change quickly. This is called market volatility. When markets are tumbling, as they sometimes do, the news feeds can be unsettling. You might wonder whether you should sit tight or cash out. However, by switching to cash when markets are down, you risk locking in your losses. In this chart we can see the impact of switching to cash during a market downturn, as happened in 2020.

Between February and March, the Aware Super High Growth Option lost around $15,000 of its value, but by November of the same year, it was worth more than it was before the drop. Anybody who switched to cash on March 23rd saw little to no growth for the same period – so instead of avoiding a loss, they locked it in.

As you can see, there’s lots to learn about investments. To find out more, make an appointment with one of our experts, for no extra cost, visit aware.com.au/book