Once the foundation of your retirement savings strategy is in place, it’s time to look at how to make the most of your super.

Asset allocation

This refers to the mix of investments, in terms of shares, property, cash and fixed interest that you include in your portfolio. Asset allocation is the main influence on the investment returns you will receive. It also determines the amount of risk you are exposed to.

Over the long term, shares and property can be expected to produce the highest returns. However, the returns from one year to the next are quite uncertain. They may go up in value, or they may go down. This greater fluctuation in their value means shares and property are more risky.

Fixed interest investments such as bonds are less risky. Changing interest rates can affect their value, so they can still go up and down in value, but their prices are much more stable than shares or property. Over the long term, fixed interest provides lower returns.

Cash is the least risky asset class, but also produces the lowest returns.

Tax and fees

The two main drags on your savings growth are tax and fees.

Some tax is unavoidable, but you can reduce the impact of tax by selecting sound investments, and holding them for the long term. The more often you change investments, the more often tax will be payable on any realised capital gains.

Fees also reduce investment performance. Selecting the superannuation fund that allows you to implement your preferred strategy, and does so for the lowest level of fees, will assist your long-term goals.

Industry super funds provide a range of investment options, and charge lower fees than most other types of superannuation funds.

The value of advice

Small changes to your investment strategy can make a big difference to your final result. A 1-2% increase in your investment returns, after tax and fees, could add tens of thousands of dollars to your retirement savings.

An IFFP planner can help you understand investment risk and return, and recommend an investment strategy that’s right for you: Book an appointment