You can invest your super in shares. In fact, you might not know it, but a decent portion of your super is probably already invested in shares. However, let’s take a look at getting a more direct exposure to shares.
In this article, we’re going to go through the process of buying shares through superannuation and the different ways of using your super to invest in shares.
Yes, you can invest your super in shares, provided your super fund offers shares as an available investment option.
There are two ways you can invest your super in shares, as follows:
If offered by your super fund, you can invest in the general Australian Shares investment option and/or International Shares investment option.
These investment options will provide you with an immediate portfolio of diversified shares, either actively or passively managed by the investment manager.
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However, if you choose one of these options, you will not necessarily know which underlying shares are owned or the allocations to each specific company. But don’t let this deter you. No matter how good you think you are at picking individual stocks, these managed fund options will probably provide better results than you over the long-haul.
Some super funds will provide you with the ability to invest in individual companies via a trading platform, giving you greater transparency and control over which shares you invest your super into.
You’ll usually pay higher fees for the privilege, so look into the costs before you start trading. Also, it’s a good idea to understand how dividends and realised capital gain earnings are taxed within super before you get started.
If you’re thinking about buying specific individual shares with your super, there are a few things to consider, first.
Purchasing individual shares with your super will take you down the rabbit-hole of stock-selection that will waste many hours, days, weeks and months of your life. In reality, a much simpler, diversified investment option has a very high probability of achieving better returns than your half-baked, hack-job, wanna-be Warren Buffet approach.
The mere fact that you are reading an article about whether you can invest your super in shares suggests that you should keep your amateur fingers out of your super pie.
So it’s up to you. You can switch-off right now and save months of your life, or you can carry-on with your Wolf of Wall Street charade.
To buy shares in individual companies with your superannuation you will first need to set up a trading account within super and then transfer funds from your main account into the trading account to begin trading.
If you hold your super through an Industry Super fund, you will need to see if they offer a DIY or direct investment solution, which may allow you to purchase direct shares, rather than be limited to the general investment options. There will likely be an additional cost for this option and you will need to speak with the super fund to find out how to activate this.
Some of the Industry Funds that offer the ability to buy shares with your super include AustralianSuper, CareSuper and HostPlus.
If you have a retail super account, you should be able to purchase shares through a trading facility with most providers. There will be an additional cost for this option. You will need to speak with your financial planner or super fund to activate this.
If you have a self managed superannuation fund (SMSF), you can establish a trading account with any online or in-person broker account. You just need to ensure the account name is in the precise name of the SMSF. You also need to make sure your SMSF investments are aligned with your SMSF Investment Strategy documentation.
Watch this video to understand how SMSFs work and the pros and cons of SMSFs:
Given that super is a long-term investment, it can be beneficial to invest your super in shares. Investing your super in shares can provide good long-term investment returns including franked dividends for Australians owning shares in Australian companies.
However, you need to consider the best way to get access to shares and ensure that you are comfortable with the risks and volatility associated with share market investing.
As mentioned earlier, investing in the Australian Shares or International Shares option through your super fund can be a very simple and diversified way of gaining exposure to the sharemarket, without needing to worry about the costs and complexities of having a share trading account.
If you would prefer to hand-pick your shares, or invest in exchange-traded funds (ETFs) you will need a trading account. In this instance, there will be additional costs and it will be up to you to ensure adequate diversification is achieved if you wish to minimise risk.
Whichever option you choose, investing your super in shares will expose this portion of your portfolio to high levels of volatility and cause your balance to fluctuate greatly; so, be ready for the ups and downs.
Can I Invest My Super in an Index Fund?
Yes, most super funds now offer index fund options as part of their standard investment options. Therefore, you do not necessarily need to open a trading account within your super in order to purchase index-ETFs, because an index fund option will generally provide a similar like-for-like outcome.
For example, if your super fund offers a Balanced Index option, this index fund option will provide you with investment exposure to a range of asset classes (Australian and international shares, fixed interest, property, etc.) via index options only, using an asset allocation commensurate with a Balanced risk profile. An investment option like this can provide cost-effective, diversified exposure to a range of asset classes.
Alternatively, your super fund may offer the Australian Shares Index option, which will likely replicate the S&P/ASX 200 or 300, which provides diversification across Australian shares only.
Should I Change My Super Investment Option?
You should change your super investment option if it is not aligned with your comfort for risk and what you are trying to achieve with your super. Before deciding whether or not to change your super investment option, there are a number of considerations.
The first thing to do is to calculate how much super you need to retire. Then, determine what investment returns are needed between now and then, including expected contributions, in order to achieve your retirement objectives.
Once that calculation has been made, you should then look at the investment options available to you, along with their expected average long-term returns, to see which option is aligned with the returns required to achieve your goals.
Finally, you should:
- Consider the risk and volatility levels of your chosen investment option to ensure you are comfortable with it;
- Make sure your chosen investment achieves adequate diversification;
- Understand the ongoing investment management costs; and
- Understand any transaction costs incurred in changing your super investment option.
Best Superannuation Investment Options 2023
The best superannuation investment options in 2023 for your super is the option that has the highest probability of achieving your retirement objectives, within the level of risk that you are comfortable with.
You’ve worked hard for 30-years. Your life savings isn’t something you want to gamble with.
If you would like personal advice in helping you determine your retirement objectives and put in place an appropriate investment option, our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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