Super Fund Investment Options Australia — Types, Choices and Strategies
This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.
Contents
Your super fund invests your money on your behalf — but you have a say in how. Most Australians are in their fund’s default investment option without ever consciously choosing it. Understanding your investment options is one of the most financially impactful decisions in your super journey.
The Standard Investment Option Spectrum
Super funds offer investment options across a spectrum of risk and return, defined by the proportion of “growth” assets (shares, property, private equity) versus “defensive” assets (bonds, cash, fixed income).
| Option | Growth % | Defensive % | Expected return (long-run) | Suitable for |
|---|---|---|---|---|
| Cash | 0% | 100% | ~3–4% | Near-retirement, capital preservation |
| Conservative | ~30% | ~70% | ~4–5% | Low risk tolerance, 0–5yr horizon |
| Balanced | ~70% | ~30% | ~6–7% | Medium risk, 5–10yr horizon (MySuper default) |
| Growth | ~80–85% | ~15–20% | ~7–8% | Growth-oriented, 10yr+ horizon |
| High Growth | ~90–100% | ~0–10% | ~8–9% | Maximum growth, long horizon, high volatility tolerance |
Returns are illustrative long-run net estimates after fees and tax. Actual returns vary significantly year to year.
What Is the Default (MySuper) Option?
When you join a super fund and don’t make an active choice, you’re placed in the MySuper default option. By law, MySuper products must be simple and straightforward — typically a balanced or growth option.
Most major industry fund MySuper products are in the growth category (~80% growth assets) rather than the traditional “balanced” (~70% growth). This reflects that the typical Australian super member has a long investment horizon where a growth allocation is appropriate.
MySuper products are subject to APRA’s annual performance test. Funds that fail the test two consecutive years cannot accept new members. See MySuper and the Performance Test.
Growth vs Defensive Assets: What You’re Actually Investing In
Growth assets include:
- Australian and international shares: Listed company equities traded on the ASX and overseas exchanges (S&P 500, MSCI World). These are the highest-return and highest-volatility component of super portfolios.
- Property: Typically unlisted direct property (commercial, industrial, retail) or listed property trusts (REITs). Less volatile than shares but with different liquidity characteristics.
- Private equity and infrastructure: Unlisted investments available to large funds that provide diversification and often stable long-term returns not correlated with share market movements.
Defensive assets include:
- Fixed income / bonds: Government and corporate bonds that pay regular interest. More stable than shares but subject to interest rate risk.
- Cash: Very low risk, very low return. Appropriate near or during retirement as a capital preservation measure.
The Impact of Investment Choice on Retirement Balance
The difference between investment options, compounded over decades, is substantial.
Example: $100,000 in super at age 35, no additional contributions, 30 years to age 65:
| Option | Assumed net return | Approximate balance at 65 |
|---|---|---|
| Cash | 3.5% | ~$281,000 |
| Conservative | 4.5% | ~$374,000 |
| Balanced | 6.5% | ~$661,000 |
| Growth | 7.5% | ~$878,000 |
| High Growth | 8.5% | ~$1,163,000 |
Illustrative only — assumes constant returns. Actual returns include significant year-to-year variation.
The higher-growth options involve more volatility — your balance may drop 20–30% in a bear market year. But for a member 30 years from retirement, a temporary market drop is largely irrelevant because there is ample time to recover.
The risk-return trade-off becomes more relevant as you approach retirement. A 30% market drop the year before you retire has a very different impact than the same drop at age 35.
Switching Investment Options
Most super funds allow you to switch investment options at any time through their online portal at no cost (some funds charge a switching fee — check your Product Disclosure Statement).
When switching makes sense:
- You’re in the default balanced option but have a long time horizon and low withdrawal anxiety — a growth or high-growth option may be more appropriate
- You’re approaching retirement (5–7 years) and want to reduce sequence-of-returns risk by moving toward more defensive options
- You’ve done analysis and believe a specific option — such as an indexed option — better fits your fee and strategy preferences
When to be cautious about switching:
- During market downturns — switching from growth to defensive after a market fall locks in losses and may miss the recovery
- Based on short-term news or market events — super is a long-term investment; short-term noise should not drive strategy changes
- Without considering the insurance impact — some funds tie insurance to the investment option; switching may affect your insurance terms
Indexed vs Actively Managed Options
Many large super funds now offer an indexed option — where the fund tracks a market index (such as the ASX 200 or MSCI World) with minimal active management. These options typically have lower investment fees than actively managed options (often 0.1%–0.3% vs 0.6%–1.0%).
The debate between indexing and active management in super closely parallels the broader investing debate. Long-run evidence from APRA data suggests that the majority of actively managed super options underperform comparable indexed strategies after fees. However, some large industry funds with access to unlisted assets (infrastructure, private equity) have added genuine value through active management.
Ethical and ESG Investment Options
Most major super funds now offer an ethical or ESG (Environmental, Social, Governance) investment option. These options screen out or underweight companies in industries such as:
- Fossil fuel extraction
- Tobacco
- Weapons and defence
- Gambling
- Controversial activities
ESG options have historically had comparable or stronger performance than equivalent non-ESG options in recent years, partly because excluding fossil fuels was beneficial during the period of energy sector underperformance. Past performance of specific options should not drive expectations about future performance.
Frequently Asked Questions
Should I switch to a high-growth option at 30? For someone with a 30+ year investment horizon, a growth or high-growth option is generally appropriate if you can tolerate seeing your balance drop in market downturns without making panic decisions. The higher expected return from 100% growth assets compounds significantly over 30+ years. This is general information — your personal circumstances matter.
What’s the difference between MySuper and a choice option? MySuper is the regulated default — simple, straightforward, and subject to APRA oversight including the performance test. A choice option gives you access to a wider range of investments, potentially including indexed options, sector-specific options, and direct investment. Choice options are not subject to the performance test.
Can I have part of my super in different investment options? Yes — most funds allow you to split your super across multiple investment options. For example, 70% in growth and 30% in cash. This can be used to balance growth exposure with stability needs.
Investment Options Guides
- Super Fund Investment Options Explained
- How to Choose a Super Fund Australia
- MySuper vs Choice Product
- How to Change Your Super Investment Option
- Balanced Super Fund — What It Means
- Growth Super Fund — What It Means
- High Growth Super Fund — What It Means
- Conservative Super Fund — What It Means
- Ethical Super Funds Australia — ESG Options
- Asset Allocation in Super Explained
- Defined Benefit Super Funds Australia
- Super Cash Option — When to Switch and When Not To
- AustralianSuper Investment Options Guide
- International Shares Option in Super
For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.
Investment Fees: What You’re Actually Paying
The investment fee (sometimes called ICR — Indirect Cost Ratio) is charged within the investment option and is not separately visible as a line item — it’s deducted from the fund’s returns before reporting net performance.
A fund reporting a net return of 8% at a 0.15% investment fee earned 8.15% gross. A fund reporting 8% at a 0.85% fee earned 8.85% gross. The higher-fee fund had to outperform by 0.70% just to deliver the same net return.
At a $200,000 balance, 0.70% more in fees = $1,400/year. Over 20 years at 7% returns, that $1,400/year fee drag equals approximately $57,000 in foregone final balance — purely from fee difference on the same gross return.
This is why the investment fee is often considered the most controllable variable in super investment performance. For comparable investment strategies, lower fees reliably compound to better outcomes.
Default Fund Lifecycle Strategies
Some super funds offer lifecycle investment options that automatically reduce growth exposure as you age — moving from a high-growth allocation in your 20s–40s to more conservative allocations in your 50s–60s.
Lifecycle options are simple and appropriate for members who want to “set and forget.” However, they are not universally superior — members who are comfortable managing their own allocations may prefer to remain in a fixed growth option longer, particularly if they have a long time horizon or a higher risk tolerance.
Review whether your fund offers a lifecycle option and whether it matches your retirement timeline and risk preferences.