Myth: You can judge a super fund by its earnings each year
There are almost 250 different Australian super funds – so how do you choose which one to go with? If you Google ‘Which is the best super fund?’ you won’t get a straight answer. In fact, you may even tumble into a rabbit hole of super fund comparison sites, ratings and investment advice.
Many of us might fall into the trap of ranking super funds based on their returns for the current year, however these figures can be driven by market fluctuations in the short-term. Moreover, there does not appear to be a particular ‘type’ of super fund investment that consistently outperforms others. Super is a long-term investment and it’s important to consider a number of factors, rather than relying on investment formulas or industry benchmarks.
Fact: The ‘best’ super fund is the one that you feel suits your financial habits
When choosing a super fund, it’s important to think about what you value and how much risk you’re comfortable with. Everyone has different perceptions of ‘value’. For some, a good value super fund is one that charges lower annual fees, and for others good value may be a super fund that provides additional insurance benefits or financial services.
There are a number of factors that can help you determine which super fund may suit you:
Fees - Super funds charge different fees. You may prefer to keep fees at a minimum, or perhaps you may explore funds that provide additional benefits that justify the fees, e.g. additional insurance benefits or financial advisory services.
Investment strategy - Super funds vary in terms of investment strategy. While your super is being ‘held’ for your retirement, the money is invested in different ways, e.g. cash, property, shares. You can specify how your money is invested, keeping in mind that some investment options are more stable than others.
Risk - You can let the super fund decide how risky or conservative your investment strategy should be based on your age and life stage – usually you will get a riskier or more aggressive investment strategy when you are younger because generally you have longer till you retire. However, if you’re not comfortable with high stakes options, you can elect a strategy that is more conservative, or one that diversifies the range of areas your money is invested in.
Find out more about how Essential Super could be right for you.