Download What`s the right SASS investment allocation?

What’s the right
SASS investment
allocation?
Basic Advice Series |
Formerly State SuperFinancial Services
ISSUED 01 JULY 2016
Choosing the right investment
strategy for your super is an
important decision. There is no
one approach that suits everyone.
What’s most important is that you
understand how your money is
invested and can live with the
associated risks.
There are four SASS investment choices (see figure below) and
you can choose to invest in one or more of the strategies in any
proportion. If you’re a contributory member of SASS (ie, contributing
fortnightly to your account), your chosen investment strategy only
applies to your personal account balance. Your Employer Finance
Benefit, generally the largest portion of your super, isn’t affected by
your investment choice or market returns as this is a defined benefit
and is linked to your salary and years of scheme membership. That’s
why the default Growth strategy is generally most appropriate for
contributory scheme members. Over all, your super benefit remains
quite conservative.
For deferred members, (ie, no longer actively contributing to SASS)
your investment choice is very important as it applies to your entire
deferred lump sum benefit.
An extra return of just 1 or 2 percent per annum on your deferred
SASS over the course of your working career can make a big
difference to your retirement lifestyle.
It’s important to understand the asset classes that make up the
superannuation options available in your fund. There are generally
four asset classes available to investors:
• 1. Cash
• 2. Fixed interest securities
• 3. Property
• 4. Shares or equities (domestic or international)
Growth
Strategy
Balanced
Strategy
Cash, in the short-term, is the least risky of the asset classes.
Typical cash investments include short-term securities, bank
accounts and money markets.
Fixed interest securities include investments such as bonds and
debentures offered by government and semi-government bodies,
banks and companies.
Property generally refers to “property securities” and can include
properties in the commercial, industrial, mortgage or hotel sectors.
Conservative
Strategy
Cash
Strategy
Shares can cover a range of companies and sectors. The price of a
share can be influenced by many different factors including company
performance, market sentiment, economic and political influences.
The Growth, Balanced and Conservative strategies also invest in a
non-traditional asset class known as ‘alternative assets’. These may
include private equity, infrastructure investments and hedged funds
designed to provide higher investment returns that are not aligned
with market movements.
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What’s the right
SASS investment
allocation?
How do I decide what’s right for me?
In setting your personal strategy, there are three
general rules of thumb to keep in mind:
1. Only accept as much risk as you are comfortable with.
Financial markets will continue to move in an upward and downward
fashion over the life of your investment. If you feel anxious and switch to
Cash at the wrong time, then you will destroy value within your super.
2. Consider your time horizon.
Your comfort level with volatility usually relates to the time you have
available to invest the funds in question. In general, short-term volatility
on funds that will not be needed for 10 or 15 years is less of a concern
than short-term volatility on funds that will cover next year’s income.
3. Stick to your strategy.
It’s important to have a long-term strategy that matches your longterm goals, but most importantly, not to change it based on shortterm influences.
Risk and Return
All investments involve some degree of risk and volatility. Usually the
higher the potential return on an investment, the higher the risk and
volatility will be. The reverse is also true. As your investment allocation
increases from cash to fixed interest and then to property and shares,
your expected return increases but so does the price fluctuation, or
‘volatility’. In shares and property you are rewarded for taking shortterm risks with higher returns.
What are the objectives of each investment strategy?
The Cash Strategy is the most conservative investment choice in
SASS, with an investment return objective of slightly higher than
inflation over a three year period. Of course, the associated risks are
negligible.
The Growth (default) Strategy is the most aggressive. With an
investment objective to exceed inflation by more than 4.0% pa over
a ten year period, risk increases, with a negative return expected
3 to 4 years in any 20 year period.
To find out more about
how we can help you now
and in the future call your
member service team
on 1800 620 305
The Conservative Strategy has an objective to exceed inflation by more
than 2% pa over a four year period. In order to achieve this higher
potential return, investment volatility is introduced, and a negative over
all return is expected 0.5 to 1 year in any 20 year period.
The Balanced Fund increases exposure to growth assets, with higher
expected returns and more risk. While the investment objectives are
to exceed inflation by more than 3% pa over a seven year period,
the chance of a negative annual return rises to 2 to 3 years in any
20 year period.
This information is of a general nature only and is not specific to your personal
circumstances or needs. It is published for your interest. Before making any
decisions based on this information you should consider its appropriateness to you.
Every effort has been made to ensure the information contained in it is accurate.
We strongly recommend that you consult a financial planner before taking action
based on this information.
State Super Financial Services Australia Limited trading as StatePlus is the holder of
Australian Financial Services Licence 238430, ABN 86 003 742 756. Neither the SAS
Trustee Corporation nor the New South Wales Government take any responsibility
for this information or the services offered by StatePlus, and nor do they or StatePlus
guarantee the performance of any product provided by StatePlus.
Formerly State SuperFinancial Services
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