Hi,
I'm currently analysing and comparing different superannuation options and potentially changing from my Australian Super Balanced. I'm looking at Rest, Sun and Hostplus how do they compare in terms of returns?
For a 25 year old male like myself is it better to go with more growth for a like more risk rather than balanced?
At 25, go for high growth. No point them sticking a portion of your super in "cash" earning bugger-all.
At 55+ start looking at moving to a more conservative option.
Typically, it's better for a young person to go into a high growth option because the theory is that they tend to return more in the long run. However, during the years, there'll be higher peaks and lower troughs than more conservative options.
Suitability for the option will depend on your risk profile. If you can't handle risk (ie, you get anxious/panic when you see the prices go down), the high growth (more volatile) strategy may be counter-productive. When it hits a low, some people panic and take their money out - that solidifies their losses. Those that are comfortable will leave their money in that option hoping that it'll float back up to the previous price over time (theoretically, it will eventually). I say theoretically because there are no guarantees.
Post is for super not share investing. I'd assume very few people look at their super returns more than once a year, so doubt they'd notice short-term drops in market and panic.
Post is for super not share investing.
My response was for super, not share investing. When I said "people panic and take their money out", I meant that people pull their money out of that option and, in a falling market, they might put it in a less volatile option that doesn't seem to be falling as fast. However, when the market grows again, that less volatile option will likely grow much less than the previous.
I'd assume very few people look at their super returns more than once a year
I think you'll be surprised at the increase of people who now look at their super regularly. Over the last couple of years, there's been a focus on rolling out digital apps so members can check and update their details - similar to online banking.
so doubt they'd notice short-term drops in market and panic.
Given the typical example they use for a cycle is 7 years, the short term drops come in periods of months or years (rather than days or weeks) so it'll be hard not to notice. Those drops alsl often come with media doom-and-gloom reporting so it's not hard to see why some people react to it.
I'd assume very few people look at their super returns more than once a year, so doubt they'd notice short-term drops in market and panic.
You're probably right, but one year my super's annual statement showed the investment return was -18%. After my contributions, I still went backwards over the year.
That might scare some people into moving to a 'safer' option (and thus missing the subsequent recovery/gains).
Look at high growth, or indexed funds if they offer very low fees. Get an investment mix that is relatively low on defensive assets, historically speaking over the long term the positive years will make up for the negative years.
70/30 to 80/20 growth assets verse cash etc
As ever, much more consideration needs to be put into answering your question, but generally speaking, younger people (those younger than about 50) should be seeking out the more aggressive investment options.
Neither. If I had to pick out of the two, it'd be Growth. But even the "High Growth" options tend to have 10% in defensive assets such as cash or bonds. I feel this is a waste as it means 10% of your super is restricted to 2 - 4% growth, rather than the average 8% return provided by equities.
As you're 25 and won't be able to touch your super for 40 years, I'd go 100% equities. The split between Australia (ASX) and international is up to you. A commonly recommended split is 30% Aus, 70% international (unhedged).
Sunsuper allows you to go 100% equities like this. They have a partnership with Vanguard who manages their index fund offerings.
I would say go for more higher risk as your fairly young and see how that goes. Assess that and see how that pans out. You can always change go back to balanced mode if it doesn't work out.