Key points
  • Investments are forward-looking.
  • We consider a range of factors including risk, expected returns and available data when investing your super.We’ve been investing in small companies that have been performing well particularly during the pandemic.
  • We review our investment portfolios each week to help protect your super and maximise your long-term returns.Given the uncertain economic climate, we continue to take a cautious approach when investing our members’ super.

Throughout my 40-year career, I often get asked about tips for making a successful investment. My response is simple: knowledge is power. It’s no secret that the more a person understands what they are investing in, the better informed they are when it comes to making decisions about their investment.

The same applies to your super. While it’s tempting to postpone managing your super to a later time, it pays to stay on top of your retirement income today to ensure that you set yourself up for when you are no longer earning an income. After all, an average Australian spends at least 40 years of their life working for their super, so it makes sense to understand how your super fund manages your hard-earned money.

Here’s an overview of some of the things that the investment team at Australian Catholic Superannuation & Retirement Fund considers when we invest your super.

Risk versus returns

Most people invest with the expectation of receiving some returns from their investments. Given that no one can predict the future, the expected returns are uncertain.

All investments carry risk. Generally, in an up-market an investor is rewarded with higher returns if they are willing to take on more risk. The opposite is also true.

At Australian Catholic Super, we offer 14 investment options for members who are accumulating super and three types of account-based pensions for those who are retiring or have retired. Members can choose from these options to help meet their individual needs.

Each week, we review these portfolios to help maximise the returns against the risks of your investments, taking into account factors such as the fund’s long term (also referred to as ‘strategic asset allocation’) investment strategy and regulatory requirements around risk management.

During these reviews, we determine the proportion of growth and defensive assets we hold in each portfolio to ensure we meet our investment strategies. Typically, growth assets refer to riskier investments such as shares, property (for example, residential homes and commercial buildings) and infrastructure (for example, roads and railways). Defensive assets are generally safer investments such as cash and bonds.

Some of our portfolios also include investments in alternative assets, which consists of an equal split between growth and defensive assets.

If you’ve invested in our LifetimeOne default fund, we invest in a higher proportion of defensive assets on your behalf as you grow older. For example, members who are below 40 years old would find that they are invested in a higher percentage of growth assets compared to members who are in their 50s. This is because younger members have a longer time horizon before they retire, so the impact of losses they may encounter during their working life is likely to be softened by the gains they experience when the investment markets are strong.

In other words, we add diversification and defensive strategies to help protect your investments as you get older.

LifetimeOne graph

Read more: Investment terms you need to know

Data

In the previous section, we’ve determined that a person invests based on their expectations of the future.

As the future hasn’t occurred, investors (including our investment team) use indicators such as data, research, surveys and the media to understand the outlook for local as well as global markets and economies. These indicators include unemployment, inflation and interest rates, consumer sentiment, company financial results and profit forecasts as well as the value of the Australian dollar relative to other currencies.

When you hear or read about share prices rising off the back of the release of information around these indicators, it’s typically because investors perceive the data to be better than what they’d expected. The converse is also true when the share market falls in value.

Buy low, sell high

Buying equities when they are cheap and selling them at a higher price is a well-known strategy in investment. In reality, it can be challenging to implement because share prices reflect people’s emotions, behaviour and thought processes, all of which are hard to predict. For example, when the economy is in recession, share prices are usually low due to uncertainty and fear amongst people. While some investors may sell their shareholdings due to the negative sentiment, others may see this an opportunity to purchase stocks at a cheap price with the view of making a profit when the economy recovers and share prices increase.

Australian Catholic Super takes a long-term view when investing your super and make decisions based on data as well as research. We also collaborate with professional investment firms such as Frontier Advisors to provide independent advice, closely monitor your investments and keep a lookout for opportunities to maximise your returns.

Read more: Should I switch my investments during a market downturn?

Price earnings (PE) ratio

One measure that we use to assess whether a company’s shares are priced at a low or high level is the company’s price earnings (PE) ratio. This ratio measures the value of a company’s shares compared to the money it earns. For instance, a company whose shares are valued at $100 and earns $10 a share will have a PE ratio of 10. A high PE ratio can be a sign that the market expects a company to grow, or it could mean that the company is overpriced.

Read more: Investing our members’ super during uncertain times

In summary, we consider a range of factors when making decisions when investing your super. If you need guidance with your super investments, you may like to speak to our in-house team of financial advisers, who can provide financial solutions that are tailored to your circumstances.

Any advice contained in this document is of a general nature only, and does not take into account your personal objectives, financial situation or needs. Prior to acting on any information in this document, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek independent financial advice if you are unsure of what action to take. Past performance is not a reliable indicator of future performance.

 

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