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Super and Shares 101

Super and Shares 101

Essential Super is going strong, with fund members currently enjoying strong investment performance for 2016, but what does that actually mean for your money?

Essential Super has continued its strong investment performance for 2016, with returns exceeding investment objectives since the product began in 2013.

Not sure what that means? In a nutshell, it’s great news for you because your super is currently invested in assets that are earning high returns. And the higher your returns, the faster your super balance may grow.

What affects your investment returns? 

Generally, your Essential Super is invested in different types of assets, including Australian and international shares. This means your balance will often be affected by what’s happening in share markets, both here and overseas.

Anything that impacts the share market may also impact your Essential Super investments. That includes major global events, even if they’re happening far away from Australia.

For instance, the upcoming US elections might mean that share markets go down for a bit, especially if there’s a change in government. However, historically markets have generally recovered over longer periods of time, although past performance is not an indication of future performance.

So even if this type of event affects your short-term returns, if you’re years away from retirement, there may still be time for your super to build up again before you retire.

Why invest in shares?

When you invest in shares, there’s always a chance your returns could go up or down. And because super is a long-term investment, it’s almost impossible to judge the future value of your super based on your short-term returns.

Doesn’t that mean your super would be better off invested in assets that are less volatile than shares?

Sure there are assets that offer more reliable returns than shares, such as cash and fixed interest – and some of your super is invested in these too.

Although the returns on these defensive assets are usually more stable, historically they’ve provided lower returns than shares over the longer term. If your super was only invested in defensive assets throughout your working life, your super balance might not grow fast enough to fund a comfortable lifestyle by the time you’re ready to retire.

Getting the right mix

Depending on your age when it comes to investing, it makes sense to consider having a diverse portfolio containing a mix of assets1. These include growth assets (Australian shares, international shares and property) and defensive assets (fixed interest and cash).

With Essential Super’s Lifestage investment option, your asset mix is matched to your stage of life. This means that while you’re younger and you potentially still have years to ride out any ups and downs in the market, your super is invested mainly in growth assets. Then, as you get closer to retirement, more of your super will be moved into defensive assets to help keep your money more secure. You can change your investment options at any time when you log on NetBank or calling us on 13 4074.

So even though share values can go up or down regularly – even on a daily basis – don’t be overly concerned. You won’t be using your super until you retire, so it makes sense to consider how your super performs over years and decades, rather than weeks and months.

Need more information?

If you want to learn more about how your super is invested, call our Super Concierge on 13 40 74 and they will be happy to answer any questions you have.

[1] https://www.moneysmart.gov.au/investing/invest-smarter/risk-and-return/diversification. Things you should know: This article is intended to provide general information of an educational nature only. Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in Commonwealth Essential Super ABN 56 601 925 435. This information is not financial product advice and does not take into account any person’s individual objectives, financial circumstances or needs. You should read the PDS for Commonwealth Essential Super and consider talking to a financial adviser before deciding whether to acquire or continue to hold this product. Download the PDS at commbank.com.au/personal/superannuation/essential-super.html, collect one from any branch of the Commonwealth Bank or call us on 13 4074 and we’ll post one out to you. Colonial First State is a wholly owned subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124 (‘the Bank’). The Bank and its subsidiaries do not guarantee the performance of Essential Super or the repayment of capital by Essential Super. An investment in Essential Super is via a superannuation trust and is therefore not an investment in, deposit with or other liability of the Bank or its subsidiaries. An investment in Essential Super is subject to risk, loss of income and capital invested. Where we mention 'us', ‘our’ and 'they', we mean Colonial First State.