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Recently we unpacked the different structures your superannuation can be invested through (and if you missed the rundown on Industry funds vs Retail vs SMSFs, here’s where you can catch up). 

Now let’s dive into what actually goes inside those funds: aka the investment options.

Think of it like this. Choosing a super fund is a bit like picking the restaurant, whereas choosing your investments is like picking your meal. And yes, some menus give you way more choice than others.

What is a pooled investment?

If your super is with a traditional industry super fund, you’ve probably seen these pre-mixed investment options before. Think: Conservative, Balanced, Growth, High Growth, etc.  

This way of investing is sort of like ordering your meal from a set menu, and no, the chef won’t let you make changes!

Some of the differences between options like "high growth" and "conservative" is how much of the investment is held in different asset classes. Typically, this will mean:

High Growth = more shares, property, infrastructure, private equity
Conservative = more cash and fixed interest

In the finance world, these are called pooled funds because everyone's money is combined into one large pool, and invested on behalf of each member. 

What are the downsides to pooled investments?

Here’s the catch: pooled funds are very much a “take it as it is” situation. Want to switch up the mix? Pick your own investments? Change the proportions? Sorry, no can do.  cando. 

Everyone in the pool gets the same setup. That means if the fund changes the mix, everyone gets the update (whether they asked for it or not).

And since you don’t get to choose what is in the investment option you're essentially trusting the fund to make good choices on your behalf! 

What is a direct investment?

Unliked most pooled investments, direct investments generally let you pick  and choose your own investments, so you can mix and match a portfolio that can be more tailored to you. Sort of like going to a buffet, where you can pick and choose exactly what you want on your plate.

Here’s a quick rundown of what you might find on the direct investment menu:investment menu:

• Shares: Equity (aka part ownership) in specific companies, both globally and within Australia. ownership) in specific companies, both globally and within Australia. 

• ETFs: Think of it as a basket of different investments (such as shares, bonds and commodities) bundled into one product that trades on the stock market, giving you instant diversification in a single purchase.

• Term deposits: Locking your money away for a set period in return for a fixed, predictable return.

Direct investments can come with some of perks - you can get more control, more choice and the ability to build a portfolio that can be more tailored to your goals, risk appetite and personal preferences. 

While some industry super funds do offer direct investments, it’s usually limited to under 100 options and you may be confined to only the ASX/S&P300 equities. 

Meanwhile, retail super funds like Netwealth, offer different account types, providing access to a much broader investment universe with over 750+ options. This includes the flexibility to invest in Australian securities beyond the ASX300, and global securities on multiple international exchanges.    

Things to know before investing directly

More choice also means more responsibility, so you’ll need to be comfortable doing your own research, monitoring your investments and making investment decisions along the way. 

Fees can also vary depending on what you pick, and the admin side can be a little more hands on than a premixed investment option.

Introducing Netwealth Super Accelerator

Netwealth’s Super Accelerator offers a more flexible approach to super, designed for investors who value choice and control. With professionally tailored portfolios managed by leading global investment managers, and comparison tools to support informed decisionmaking, it’s built for those who want to be more handson with how their super is invested.

Understanding how your super is invested is a huge step toward taking charge of your financial future. Whether you prefer the simplicity of pooled options or the flexibility of direct investments, the important part is knowing what you’re choosing and why.  

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Disclaimer:

Netwealth Superannuation Services Pty Ltd issues Netwealth Super Accelerator. Netwealth Investments Limited issues the Netwealth Wealth Accelerator Multi-Asset Portfolio Service. Information contained within this post is of general nature only. Consider whether the products are appropriate for you and seek advice where required. To help you decide, read the PDS or IDPS Guide and TMD available at netwealth - Super & Investment Solutions - Investors & Wealth Professionals.

The Information contained in this article is general information. It does not constitute legal, tax, credit or financial advice and is not tailored to an individual’s circumstances. You should consider your own personal circumstances and seek advice from your professional advisers before making any decisions that may impact your financial situation.