How to change super investment options with confidence

Before you switch, you need to be sure you know what style of investment option suits you. Don’t be tempted to pick last year’s top performer without doing your research.

If you’re young and/or your priority is maximum long-term growth and you’re comfortable with a lot of ups and downs, you might choose a High Growth or 100% shares option. On the other hand, maybe you’re happy to trade away some growth potential in exchange for more stability and would be more suited to a Balanced or Conservative portfolio.

You may also choose a mix of different investment options to meet your goals, such as in a bucket strategy for retirement.

If you’re not sure of the right allocation for you, learn more about risk profiling and your investment choice or call your super fund to find out if you can speak to an adviser for a free recommendation.

With your risk profile in mind, choose the option (or mix of options) you will select if you stay with your current super fund.

Don’t be lured into choosing an option with flashy returns if you’re not comfortable with the associated risk. Taking on a more volatile portfolio than you can tolerate is a recipe for disaster because you’re most likely to switch back to safety after a market fall and miss out on the gains when markets rebound.

Step 2: Check how your fund’s performance compares

Now you know which of your super fund’s investment options is the right fit for you, you can compare its performance with the broader market. If you’ll be selecting a mix of options, compare all of them with their relevant counterparts.

Find the investment return of your chosen option(s) on your fund’s website up to the most recent 31 December or 30 June. Note the one-year, three-year, five-year and ten-year results. If the option is relatively new, longer-term results will not be available, so just collect what you can.

Check what percentage of your chosen option(s) is allocated to growth assets (shares, property and alternatives) and find the median return of the matching risk category up to the same date in our guide to annual returns. Be sure to check you’re looking at the same date as the returns you found on your fund’s website.

Compare your fund with the median over each period (one, three, five and ten years). If the figures you collected are generally above the median, it means your chosen investment option is commonly in the top 50% of similar options at other funds. If not, your fund may be underperforming. When results are mixed, you can place more weight on long-term results to decide if you’re happy with your fund. Short-term results are less important because they can reflect a one-off variation.

You may also like to compare with the best-performing funds in your chosen risk category.

If you’re not satisfied that your super fund’s performance is competitive, you can consider switching funds.

Step 3: Find out your super fund’s investment switching policies

Before going ahead with a change to your investment option, it’s important to understand how switches are processed and any associated costs so you can go in with your eyes open and avoid unpleasant surprises.

Check your fund’s product disclosure statement (PDS) or investment guide to find out:

• How often switching is allowed – every day, week or other interval and if switches can be rejected for any reason
• The cost of switching – including any fee or buy/sell spread. Generally, no tax applies when you switch unless you have a direct investment that you are selling. Penalties may apply if you exit a direct term deposit investment early
• How long switches take to process
• If you can cancel a pending switch request if you’ve made a mistake or changed your mind
• Whether you can choose a different investment strategy for your current balance and new contributions (or for your pension account balance and your withdrawals, for example, you can have say, 80% of your balance in a balanced option and 20% in a cash option, but take 100% of your withdrawals from the cash option).

Step 4: Make the switch

To switch investment options, log in to your account via your fund’s website or app. Alternatively, an investment switching form may be available to print and return by post or email.

Take care to read the instructions carefully and correctly indicate your wishes. Common errors include switching the way new contributions to your account will be invested, but leaving your balance where it was when you intended to switch both; and selecting the wrong investment option (often because it has a similar name).

Step 5: Confirm your switch is effective

When enough time has passed according to your fund’s switching policies, check that your investment switch has been processed according to your wishes.

Use your fund’s website or app to view your new allocation.

This gives you the opportunity to quickly fix any errors you or your fund’s administrator has made and get your super on track.

What next?

If you’re interested in taking even more control of your super investments, and/or minimising costs, you can investigate direct investing and indexed options.