Investing outside of super

Super is designed to be a long term savings plan to fund your retirement and its often the best way to do so because of advantages to investing in super like tax concessions. But if you’re like many of us you may also have other medium to long term goals that mean you want to invest some of your money outside of super so you can access it when you need to.

There are a lot of opportunities to invest outside of super, the trick is finding the right mix to suit your goals and risk appetite. It’s also important to understand that just like super, the performance of other types of investments can vary over time and that those with higher levels of risk generally  perform better over the long term than lower risk investments.

What are the alternative investment options?
Investing in cash

Investing in cash assets, such as savings accounts, gives you easier access to your money and is low risk.

However, returns are usually low which means your money may not generate enough returns after fees and taxes to cover inflation. This is another type of risk because when it comes time to use your money you cannot buy as much with it (this is called your purchasing power).

With interest rates at historically low levels this is a very real risk that many investors are facing today. In response we’re seeing many conservative investors now looking for other low risk options.

Managed investments

Managed investments are generally known as pooled investments. They work in a similar way to super by allowing investors to buy assets that are managed by investment experts, who buy and sell investments on their behalf.

They are a great way to diversify your investments and allow you to invest in a range of assets including shares, property, infrastructure, bonds and cash which means you’re likely to find an option that is well suited to your risk profile or goals. But there are a lot of different products to choose from and like all investments, there are risks so it pays to get personal advice before investing.

The types of managed investments include:

  • Managed funds – this is the most similar to super and involves pooling money from different investors into one fund which is invested and controlled by an investment manager. You can invest in a single asset class like shares or fixed interest, or a multi-sector option such as a growth, balanced or conservative fund, which contain a mix of different asset classes. Because it is a pooled arrangement adding or withdrawing from a managed fund is usually fairly easy and low cost.

  • Managed accounts – these are similar to managed funds except that instead of owning an interest in a pool of assets, a portfolio of assets is bought for you which makes you the beneficial owner which can have some tax advantages. But as the only investor they can often be more expensive to run.

  • Exchange Traded Funds – ETFs are listed on the share market, which means they can be bought and sold like shares. They also allow you to invest in a range of asset classes or sectors.
Investing in shares

Generally speaking, shares have lower and fewer upfront costs, which is why they are a popular option. There are usually no ongoing costs and depending on the share you choose to invest in, shareholders can earn a regular income through dividends, as well as enjoying the potential for capital growth.

But it’s also important to understand that share prices can rise and fall, so the payment of dividends and the return of capital are not guaranteed and it likely means your investments are harder to diversify because they are all in one asset class (i.e. shares) and possibly a smaller number of companies as well.

Investing in property

Property is often seen as less risky and easier to understand than some investment options. Perhaps that’s because 66% of Australian households own their own home (with or without a mortgage)1. While property investment may seem straightforward, there are certain things you need to consider.

First the initial costs involved in purchasing a property are significant, and include a deposit, mortgage and conveyancing fees and insurance. There are also significant ongoing costs such as maintenance, real estate agent fees and rates to name a few.

When owning property, it’s also important to understand that most of your investment potential will be absorbed within one investment which means diversifying your investments can be difficult. And, like most investments, property has the potential to reduce in value.


1 ABS, Housing Occupancy and Costs

Speak to us today

Considering investing outside of super? Our financial planners can help and are available for:

  • phone discussions at a confirmed time
  • face-to-face meetings at a location near you, and
  • face-to-face meetings at one of our EISS Super offices

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