How to invest your superannuation: Super for beginners guide

Just because we may be compelled to have superannuation, is no reason to leave it to its fate. In fact, playing a role in how your super is invested is one of the key ways we can influence its outcome. Here we break down the key concepts to help you gain confidence with the investing side of super.

What is investing in superannuation?

We use the phrase ‘saving for retirement’ quite often referring to super, but saving is actually just putting money aside for a time to use on a specific purpose later. When we invest, we don’t just keep it aside, we buy something (referred to as an asset) on the premise that it will be worth more later, so we can outpace the cost of living.

Many of the principles of investing are the same inside super and anywhere else. Superannuation is simply a vehicle that holds your investments in an environment that the government treats more favourably for tax purposes than money outside of super.

Your money is pooled with other people’s superannuation money to buy and hold assets. Assets can offer profit in two ways: they may grow in resale value (called capital growth) or they may provide income such as rent or dividends.

If you have never made any active selection about what your super is invested in, it has been invested on your behalf until you’re ready to take more control, but more on that later.

Asset classes and the risk/return tradeoff

Anything that can be invested in can usually be grouped together by shared characteristics into types or classes. There are four primary asset classes: shares, property, fixed interest and cash, and they have qualities that allow us to generalise how they might behave over short and long periods of time. Then there are secondary asset classes that don’t neatly fit into the four main asset classes and whose behaviour can’t as easily be generalised. Sometimes termed ‘alternative assets’, they include infrastructure, private equity and even start-ups.