Choosing a super fund as a new investor in Australia

Question

I'm new to Australia and just started my investing. My employer wants me to pick a super fund, but I'm not sure where to start. Any advice? I'm 25 years old and my goal is to reach Financial Independence by 40.

Answer

Choosing the right superannuation fund is a crucial step in managing your long-term savings and working towards your goal of financial independence. Here are some key factors to consider when selecting a super fund:

Investment Options: Different super funds offer various investment options. These can range from conservative (lower risk, lower return) to aggressive (higher risk, higher return). Since you’re aiming for financial independence by 40 and you’re currently 25, you might consider funds that offer growth-oriented investment options, which typically invest a larger proportion in assets like stocks.

Fees: Fees can significantly impact your investment returns over time. Look for a super fund with low fees. This includes administration fees, investment fees, and any other charges. Comparing these fees among different super funds can help you choose a cost-effective option.

Performance: While past performance is not a reliable indicator of future performance, it can give you an idea of how well the fund is managed. Look at the long-term performance history of the fund to see how it has managed through different market cycles.

Insurance: Many super funds offer life insurance, disability cover, and income protection. Consider what level of insurance you might need and compare what’s offered by different super funds in terms of coverage and cost.

Additional Benefits: Some funds offer extra benefits like financial advice, educational resources, or flexible investment options. Consider whether these benefits are important to you and if they justify any extra cost.

Reputation and Stability: Consider the reputation and stability of the fund. Look into how long the fund has been operating and read reviews or testimonials from other members.

Given your goal of reaching financial independence by age 40, it’s also important to consider strategies outside of super, since superannuation cannot typically be accessed until you reach your preservation age (which is between 55 and 60, depending on when you were born). You might want to explore other investment avenues such as stocks, bonds, or real estate, which can provide income or appreciate in value over time.

Pearler can be a valuable tool in your investment journey. It’s designed to help investors like you build a portfolio aligned with your financial goals. Pearler offers features that simplify the investment process, such as auto-investing and goal tracking, which can be particularly useful as you work towards your goal of financial independence. By using Pearler alongside your superannuation fund, you can manage both your retirement savings and personal investments in a cohesive way, keeping you on track towards achieving financial independence by 40.

You can find out more about this topic here: Fire For Late Starters

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

Answer

Hi Isabella.

The best bets for super funds are typically lower cost ‘industry’ funds.  Examples of these are UniSuper, ART Super, Hostplus, REST.

There’s no one that is guaranteed to be better, they are all generally fairly similar.

For people aiming for long term set and forget and higher returns, they would typically choose something like ‘high growth’ or ‘indexed shares’ from the fund options.

Hope that helps.
Dave

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SUPERANNUATION

Isabella O'Conner.

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Dave Gow - Strong Money Australia

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