Choosing investment options
The future is uncertain. Choosing a suitable investment option for your fund is more difficult and more important than choosing a loaf of bread from a farmers’ market stall. And that is hard enough!
Our reports allow you to easily understand the important decisions that need to be made about superannuation strategy, what you can do now to improve a position, and obtain a low cost, easy to use, plan for the future.
We do more than show one number. To choose a suitable investment option our superannuation projections show what outcome is likely, and what can happen in both good and bad scenarios.
Why should you care?
One of the most important decisions to be made with a superannuation fund is how to invest it. How much should be in assets that have an expected high rate of return, with some uncertainty, versus how much in assets that have much more certain, but lower, rates of return?
For somebody 30 years old, the difference in typical sustainable spending levels can be substantial between the two extremes of investing completely in growth assets or completely in defensive assets. And there are all the possibilities between these two extremes.
Every person is individual – some prefer a higher likely spending level and are willing to take the risk that their actual level is more uncertain. Others prefer to have the likely level being lower, but with more certainty on that level. That’s why we show likely outcomes and the best and worst that could feasibly happen.
Our Investment Strategy report helps people come to an informed decision by showing the projections of future income and fund size for a number of different strategies.
What do the terms mean?
Growth assets: These assets have returns that are linked to the growth rate of the general economy. The most common examples are company shares listed on the world’s stock exchanges, and property – residential, shopping malls, offices, industrial parks etc. The rate of return on these investments is uncertain, though this is compensated by having the expected return being higher than for other assets.
Defensive assets: These assets have returns that are much more certain. Examples are bank deposits, term deposits, government debt, and corporate debentures. The high degree of certainty attached to these assets comes with a lower expected rate of return than growth assets.
Subscribers: click here for the report:
Investment Strategy: The split between growth and defensive assets in a fund is called the investment strategy. There are a variety of names used for this idea by the wealth management industry. Large superannuation fund managers give their members a choice of investment options, which have different investment strategies. In an SMSF it is a requirement of the Australian Tax Office that an investment strategy be officially adopted by the Trustees.
The investment strategy can change through the life of the fund. An mProjections subscription allows a fund’s strategy to be assessed regularly, giving investors more confidence in their retirement futures.
Lifecycle investing: One investment strategy that regularly changes the split between growth and defensive assets is a lifecycle strategy. This also goes by the name of a glide path. One example of such a strategy is to have the fund invested 100% in growth assets when a person is aged 30 or less, giving a high expected rate of return. Every 5 years the proportion of growth assets is reduced by 10%. When the investor reaches age 70 the fund has only 20% in growth assets, and 80% in defensive assets, giving a much more certain level of income.
Super Report Features
Our financial model provides a confidential report on the impacts of different investment options based on current superannuation fund size, employer’s contribution, age, and compares those to your current option.
We provide a comprehensive outline of our assumptions and modelling.
So, find out the effects of different investment options to get more effective decision making, now.