The majority of super fund members remain with the default option, which for NGS Super is Diversified (My Super). As the name indicates, this investment option uses the principle of diversification to reduce risk while producing competitive returns for the majority of members. It is suitable for medium to long term investors and has an asset allocation of approximately 70% growth assets and 30% defensive assets.
This range may vary from time to time according to the discretion of the Investment Committee, the internal investment team and our external adviser, Frontier. In terms of the growth assets held in the portfolio, the main categories are: Australian shares, International Shares, Infrastructure and Growth alternatives. The defensive assets consist of: fixed interest (yield and duration), Property (direct), Cash and Term Deposits as well as Defensive alternatives. The 10 year average return for this option at 30 June 2016 was 5.65% and the likelihood of a negative return is three in 20 years.
Investment choice often depends on an individual’s risk tolerance – the ability to remain calm when there are big swings in a volatile market. It also depends on age which is especially relevant for superannuation investments given that age restrictions apply. A standard axiom applied by financial planners is that the longer the time frame, the greater the risk that can be accepted. For example a 30 year old with a time horizon of another 30 years or more may choose to accept higher risk investments because short term fluctuations have time to be reversed. In fact declines in unit prices can be seen from a long term perspective to be an opportunity to buy more units at lower prices. In this sense the term ‘paper loss’ applies as no actual loss of units occurs, there is simply a reduction in the value of each unit. A real loss, or a ‘crystallised loss’, could however occur at the time of an investment switch, a withdrawal or rollover.
NGS Super offers different investment types: premixed options which are made up of different asset classes with varying exposure to each. Essentially, the seven options range from an asset allocation of 30% growth assets and 70% defensive assets (Defensive Option) to 100% growth (Shares Plus). Members are able to select according to the gradation of risk and potential return they will accept.
Sector specific options are made up of pure asset classes, not pre-mixed. The five sector specific options range from Cash and Term Deposits to Diversified Bonds, Property, Australian Shares and International Shares. These ‘pure’ asset classes can be mixed with other sector specific options or premixed options according to member preference.
The NGS Self Managed option allows members to invest directly in ASX listed companies, Exchange Traded Funds (ETFs) and Term Deposits. This option may suit an active investor who wants control over which specific companies, ETFs or Term Deposits they select.
So it is possible to design an individual portfolio of investments to suit your financial goals and the level of risk you are prepared to accept. NGS Super members can check their investments through Member Online after logging in to www.ngssuper.com.au. Under ‘Investments’ it is possible to see your investment choices and their proportions and if you click on ‘Your investment mix’ a green and pink pie chart comes up detailing the exact proportion of growth and defensive assets you hold in your portfolio. It is a simple guide which should be congruent with your risk tolerance and investment goals.
It is always a good idea to obtain financial planning advice before making financial decisions and NGS Super offers this service with a free, no strings attached initial consultation. Call 1300 133 177 if you would like to make an appointment.
On behalf of the NGS Super Trustee, Management Team and staff, I would like to wish all IEU members a great festive season and a happy and healthy New Year.