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High Growth Superannuation Options For Young Aussies

Superannuation is an immensely puzzling investment vehicle, particularly for one that’s mandatory for every Aussie. It’s surprising the difference you can attain over thirty years by just picking a high-growth super alternative rather than the default “balanced” alternative.

For instance, if you set $100,000 thirty years ago in a high-growth alternative rather than a “balanced” alternative, you’d have $1.6 million, over $800,000 more than if you left the funds in the default “balanced” choice.

This article will take you through some factors to consider when evaluating super options. You’ll also find a few high-growth alternatives for your superannuation.

When signing up for any super fund, they’ll frequently propose a default investment alternative into the “balanced” fund that usually has a 70/30 allotment between equities (growth assets) and bonds (defensive assets). Nevertheless, this isn’t appropriate for individuals looking for higher returns on their superannuation within a twenty to thirty-year time frame.

The greater the risk an individual takes, the higher the anticipated return, but it also boosts the potential outcomes range. There’s no assurance that your real return will be your anticipated return. To attain this higher anticipated return, you face the danger of any of the range of potential returns for the risk you’re undertaking.

For youths with an extended time to wait on returns, this isn’t as bad as it seems. You should seek investment alternatives with greater risk volatility since, over the long term, these investments have higher anticipated returns.

You’ll probably hit the lower lows in the short term, but there’s also a chance of hitting the higher highs. Since super forces you to wait till you turn 65 years or older before you can access it, you should expect to get closer to the mean anticipated return over the long term.

Following this, it’s advisable to avoid defensive asset allocations in your superannuation for youths with an extended timeline before accessing it.
Charges
Most default “balanced” super alternatives have pretty high fees since they’re actively managed — which means they have expensive fund managers handling the portfolio. A majority of which seldom surpass the returns on the total market index over the long term.

However, the only thing guaranteed from active investment alternatives is their invariably higher charges than a super indexed option.

Sunsuper’s default “balanced” alternative has a 0.65% p.a total fee compared to their “Australian Shares Index” option, which has 0.09%. On a supersize of $100,000, that’s $650 every year compared to $90 per year. This would be appropriate if they had higher returns over the long term. Keep in mind that their balanced alternatives have 30% defensive assets.

Additionally, there’s a separate administration fee you’ll have to pay. Superannuation companies charge this fee to manage your super, and it differs depending on the firm.
Diversification
A majority of the superannuation fund default investment alternatives have heavy weightings in Australian Property and Australian Shares — and it’s not prudent to have your super investments integrated extremely tightly with the Australian market.

If, for instance, the economy of Australia begins tanking separately, there’s a high likelihood that your job will be at risk. You’ll not only lose your job, but your super will also drop. On the other hand, if your superannuation is geographically diversified, you’ll be more shielded from Australia-specific downturns.
Comparisons
The comparisons for high-growth super investment alternatives in Australia are based on the assumptions below:

Historical return based over the past ten years unless stated otherwise
100,000 dollars investment base
Suitability for an individual with a minimum of twenty to thirty years before they’d have access to their superannuation and have a higher returns/higher risk appetite
No insurance alternatives

Below are excellent high-growth super alternatives with low charges, ideal for long-term investing for young Aussies.
1. Hostplus International Shares – Indexed

Investment charges – 0.09% per annum
Administration charge – $1.50 each week
Historical return – 13.00% per annum

This option tracks the MSCI Global ex-Australia Index (net returns reinvested) with lower charges.
2. Sunsuper International Shares – Index unhedged

Investment charges – 0.11% per annum
Administration charges – $1.50 each week plus 0.10% per annum.
Historical return – 10.03% per annum

This option tracks the MSCI World ex-Australia IMI (unhedged in AUD). This is roughly global equities minus Australia. Unhedged means you’re exposed to currency fluctuations. This is beneficial if the Australian dollar declines and bad if it increases.
3. First State Super International Equities

Investment charges – 0.09% per annum
Administration charge – $1.00 each week plus 0.15% per annum
Historical return – 12.35% per annum

This option tracks the MSCI Global ex-Australia ex-Tobacco (net returns reinvested) Index unhedged in AUD (before tax).
4. Rest Overseas Shares – Indexed
Investment charges – 0.00% per annum
Administration charge – $1.30 each week plus 0.10% per annum
Historical return – 12.35% per annum

This option checks with the MSCI Global ex-Australia ex-Tobacco (Net returns reinvested) unhedged in AUD (before tax) over all periods. Rest Overseas doesn’t impose any investment charges, but they compensate for it by charging a p.a administration fee.

These four high-growth super alternatives all track the same high-growth indexes. When choosing one, don’t take a keen interest in historical returns since previous performance doesn’t necessarily forecast future performance.

Since these options track identical indexes, you should focus on the charges paid annually. Rest and Hostplus have slightly better fees than First State superannuation and Sunsuper.

Even though Rest’s charges are a bit lower on a 1000,000 dollar balance over one year, because their admin fee makeup is more weighted to percentage per annum, Hostplus may have cheaper fees on higher balances. Therefore, conduct a thorough analysis before making a decision.

 

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