How Your Super Is Invested: Super For Beginners Guide

Unless you run your own self-managed super fund (SMSF) or pick your own investments, your super fund invests your money for you. But you have more say over how it’s invested than you might realise, and the choices you make can have a big impact on how much super you have when you retire.

You don’t need to pick individual shares or become an investment expert. But it helps to understand what your fund invests in, the difference between growth and defensive assets, and how to choose an investment option that suits your circumstances.

This guide explains how super investing works, the choices available to you and what to consider when deciding how your super is invested.

How your super is invested

When you or your employer contribute to super, the money goes into an account in your name. Your fund invests it according to your chosen investment option, usually pooling your money with other members’ savings to invest in assets such as shares, property and bonds. As the value of those investments rises and falls, so does your balance.

Investments earn returns in two ways:

• Capital growth, when an asset rises in value
• Income, such as dividends from shares, rent from property and interest from bonds and cash

While you are working, those returns stay in your account and are reinvested. Investment earnings in the accumulation phase are generally taxed at a maximum of 15%, although different rules apply to some types of earnings. These tax concessions can help your retirement savings grow faster than investments held outside super.

How your super is invested

If you have never told your fund how to invest your super, it is still invested, usually in the fund’s default option, explained below. And if you want to see exactly what your fund owns, super funds must publish their portfolio holdings twice a year.

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Asset classes: the building blocks

Investments are grouped into asset classes that share similar characteristics. The four main asset classes are shares, property, fixed interest and cash. Super funds sort them into two broad groups based on how they tend to behave.

Growth assets

• Shares are part ownership of companies listed on a stock exchange, in Australia or overseas. They are priced daily and pay returns through dividends and rising share prices.
• Property usually means commercial property such as office buildings, shopping centres and industrial sites. It can be listed (bought and sold on the stock exchange) or unlisted (owned directly and valued periodically).

Growth assets generally offer higher potential returns over the long term, but their values can also fall sharply in the short term.

Defensive assets

• Fixed interest (or bonds) is money lent to governments and companies. The borrower pays interest at regular intervals and repays the loan at the end of the term. Bond prices can still fall, particularly when interest rates rise quickly.
• Cash includes bank deposits and short-term money market investments.

Defensive assets generally experience smaller fluctuations in value, but their expected long-term returns are usually lower than those of growth assets.

Alternative assets

Some investments don’t fit neatly into the four main classes. These alternative assets include infrastructure such as airports and toll roads, private equity (stakes in unlisted companies) and private credit. Many are unlisted, so they are valued periodically rather than daily.

Alternative assets vary in their characteristics, so each super fund decides whether to classify them as growth, defensive or a mix of both. There is no agreed industry definition, so one fund may classify an asset as growth while another classifies a similar asset as defensive. Private equity is generally treated as a growth asset, for example, while some infrastructure and private credit investments have more defensive characteristics.

Growth and defensive assets at a glance

The trade-off between risk and return

Investors expect to be paid for putting up with ups and downs. That is why growth assets, which can fall further in a bad year, have historically delivered higher returns over the long run than defensive assets.

Super fund returns show the trade-off clearly. According to research firm Chant West, the median Growth option (61–80% growth assets) has returned 8% a year on average since compulsory super began in July 1992, after investment fees and tax. Over those 34 financial years it recorded five negative years. That means someone invested throughout the period had a negative annual return roughly once every seven years, despite earning a solid positive return over the long term.

The bad years can be big ones. During the global financial crisis (GFC), Growth options lost about 26% on average over the 16 months to February 2009, before markets recovered.

Past returns are not a reliable guide to future returns, but the pattern has held for decades. The more growth assets an option holds, the bumpier the ride and the higher the expected long-term return.

Volatility isn’t the only risk. Hold too little in growth assets and your savings may not keep pace with inflation, or may not last as long as you need them to.

To help you compare risk, super funds show a standard risk measure (SRM) for each investment option. It’s a band from 1 (very low) to 7 (very high), based on the fund’s estimate of how many negative annual returns the option is likely to have over any 20-year period. It shows how often losses might happen, not how large they could be, and funds use their own assumptions to work it out. And unfortunately it can’t predict when those losses will happen!

Why time is on your side

For most people, super is the longest investment they will ever hold. It is generally locked away until you retire after age 60 or reach another condition of release, and for many people it then funds a retirement lasting 25 years or more.

That long timeframe works in your favour in two ways. First, it gives your investments more time to recover from market falls, reducing the impact that short-term fluctuations may have on your retirement savings. Second, your returns compound. Each year you earn returns on your contributions and on all the returns you have already earned.

One risk you can control is how you react when markets fall. Switching to cash after a market fall turns a paper loss into a real one, and you can miss the recovery that follows.

As retirement gets closer

It’s wise to reassess how you’re invested in the five to ten years leading up to accessing your super. A big fall just before or soon after you retire can do more lasting damage than the same fall at 35, because you have less time to recover and you may be drawing on your savings while prices are low. This is known as sequencing risk.

Moving more of your super into defensive assets can soften that risk, but it also lowers your expected returns over a retirement that could last decades. It is a trade-off to weigh up, not an automatic step.

Understanding your super investment options

Most super funds offer a menu of investment options. They come in several styles, and the styles overlap. A diversified option can also be indexed or sustainable, for example.

• Diversified options, ready-made mixes of asset classes ranging from Conservative (mostly defensive assets) to High Growth or All Growth (mostly or entirely growth assets). The fund manages the mix for you.
• Single-sector options, which invest in one asset class, such as Australian shares, international shares or cash.
• Indexed options, which aim to match a market index rather than beat it, usually at a lower cost.
• Sustainable or ethical options, which screen investments against environmental, social or ethical criteria.
• Direct investment options, offered by some funds, which let you choose your own listed shares, exchange traded funds (ETFs) and term deposits.

Most funds let you split your money across more than one option, and choose a different mix for your existing balance and your future contributions.

Check the growth assets, not the name

Investment option names such as Balanced and Growth have no standard definition. When SuperGuide reviewed 130 super options in Chant West’s survey in August 2026, options labelled Balanced held anywhere from 50% to 75.5% of members’ money in growth assets.

The percentage invested in growth assets is one of the most useful ways to understand and compare super investment options. To compare like with like, research firms group options by the share of growth assets they hold, whatever the fund calls them. SuperGuide’s performance rankings use Chant West’s five risk categories. You can see the top options in each category in our best performing super funds lists.

Growth assets held in each Chant West risk category

These are classification bands, not precise risk boundaries. An option with 60% growth assets is not very different from one with 61%. Funds’ own option names may not match the category an option is ranked in.

Source: Chant West

Your option’s growth asset percentage is in its product disclosure statement (PDS) and on your fund’s website.

What happens if you don’t choose an investment option?

If you have never told your fund how to invest your super, your money is most likely in its default option, known as a MySuper product. Some members, such as those in defined benefit funds, have different arrangements. There are two main types of MySuper product:

• Single diversified options, which keep the same mix of assets whatever your age. They are often labelled Balanced or Growth, and many hold well over half of members’ money in growth assets.
• Lifecycle options, which invest more heavily in growth assets while you are young and gradually move more into defensive assets as you get older.

Every MySuper product publishes a product dashboard on the fund’s website, showing its return target, level of risk and fees. MySuper products, along with some other options, also face an annual performance test by the Australian Prudential Regulation Authority (APRA), and a fund whose product fails must write to the members affected.

How to choose an investment option that suits you

You don’t need to become an investment expert to take more control of your super. Choosing an investment option is sometimes called setting your investment strategy, and these steps will help you work out whether your current option still suits you:

• Find out which option you are in. Log in to your super account or check your latest statement. If you have never chosen an option, you are probably in your fund’s MySuper product.
• Check how your money is invested. Look for the percentage invested in growth assets, such as shares and property, and in defensive assets, such as bonds and cash. This tells you the level of investment risk you are taking.
• Work out your timeframe and comfort with risk. How long until you need the money, and how would you react if your balance fell 20% in a year? Our super risk profile quiz and your fund’s risk profile questionnaire can help.
• Consider whether the mix suits you. Compare your option’s growth asset percentage with your timeframe and comfort with risk. The fund’s target market determination also describes the kind of member each option is designed for.
• Compare performance with similar options. Compare your option with others in the same risk category, over five and ten years as well as one. Our super fund comparison tool ranks every option from 1 to 4 against similar options for both performance and fees.
• Check the fees. Some options cost much more than others. The comparison tool also ranks fees at $50,000 and $500,000 balances, and our guide to the super funds with the lowest fees lists the cheapest options.
• Decide whether to make a change. If your current option suits your needs, you may not need to do anything. If you decide to switch, most funds let you change investment options online, often with no fee other than a buy/sell spread. Avoid making frequent changes in response to short-term market movements. Our step-by-step guide explains how to change super investment options with confidence.

Your super fund may also offer help choosing an investment option, often at no extra cost, so it is worth asking what is available.

Fees come off every year

Just as returns help your super grow, every fee reduces your balance, and it does so every year. Options that need more active management, such as those holding lots of unlisted assets, generally cost more to run. That doesn’t mean higher-fee options deliver higher returns.

Small differences add up. Say two people each have $100,000 in super, invested in options with identical investment returns. One earns 7% a year after fees. The other pays 0.5 percentage points a year more in fees, so earns 6.5%. After 20 years, with no further contributions, the first account would hold about $386,970 and the second about $352,370, a difference of around $34,600, or nearly 10%. These figures are illustrative only.

Investment fees are only one of the fees super funds charge, so it pays to look at the total cost.

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