Direct Superannuation Investing
A question I sometimes get asked from clients is how can I invest my super in direct investments like shares, managed funds, ETFs, or do I just need to start an Self Managed Super Fund.
One part of the answer is no, you don’t need to set up an SMSF to be more selective on your investment options. However, the other part of the answer is that it depends on what your superannuation provider allows you to hold as direct investments.
In this presentation, I’ll explain what it means to hold direct investments inside your superannuation, focusing on managed funds and ETFs (exchange-traded funds), what you need to know, and what the practical options are.
On this channel we present topics for those who are preparing financially for retirement or those who have already retired and looking for education on all matter’s retirement.
Lifecycle Investment Options
For most Australians who hold retail, corporate or industry superannuation funds, you have the choice to invest in pre-set diversified portfolios with different risk levels.
Superannuation holders will be familiar with their fund investing in a diversified approach, to spread your eggs in different baskets and to effectively spread the risk.
If you haven’t made your own investment choice, the super fund will select a diversified ‘aged based’ investment approach, gradually shifting money from the growth focus in your working years to a more defensive approach as your approach your retirement timeframe.
Now, you may also be familiar with the concept of a “Balanced” investment option, which is the most common default option in Australian super funds. A typical Balanced option has a medium to high level of risk, with 60% growth investment like shares and property.
As shown in this table, the Balanced approach is not the highest level of risk and not the lowest.
These are the common pre-mixed options offered by super funds, all have different strategies to suit different investors to balance the growth prospects and to manage the stability.
The benefit is that they are diversified, simple to follow and are managed by investment professionals who can adjust their holdings based on market conditions.
Now if you don’t have the interest, time, inclination or expertise to operate an SMSF, there are still ways to take a more direct, hands-on approach to investing your super.
A number of retail, industry funds and investment platforms offer a direct investment strategy, giving you the option to invest some of your super in various listed shares, managed funds, term deposits or exchange traded funds (ETFs).
This strategy allows you to move beyond the pre-set investment options like Balanced, Growth and Conservative, and instead take more control on the specific asset class, global region, specialist fund manager or listed security that may interest you. For example, some clients want more exposure to overseas Technology companies, listed property funds or companies that can provide more franking credits.
Some of the direct investment options may include:
- Term Deposits – Capital stable and low risk, offering a safe harbour for predictable returns and allowing terms of 3 to 12 months, and slightly higher earnings that cash.
- Direct Shares – Ownership in listed companies on the ASX, higher risk/reward with direct shareholding exposure
- Managed Funds – Professionally managed portfolios across different asset classes and sectors, not listed on ASX but market prices usually updated daily.
- Exchange-Traded Funds (ETFs) – Offers diversified investment exposure, listed on the ASX and usually lower ongoing costs than a managed fund.
We get questions about the ETF market, which has gained investor popularity over the last few years and is the fastest-growing investment segment on global stock markets.
The Australian ETF market grew 36% over the 12 month period to June 2025 to total $280 billion across 427 products. ETFs can offer advantages like low fees, tax efficiency, transparency and the ability to price daily on the ASX.
Whereas ETFs are typically passively managed, a managed funds would normally try to outperform the benchmark index with the fund manager actively adjusting the portfolio.
Fees are typically higher for managed funds because you are paying for more research and investment expertise.
However, whether it’s actively managed funds or the passive ETF investments, there is no guarantee for which investment will perform better over any future period of time.
Socially Responsible Investing
Direct investing in managed fund and ETF’s can also open up more options for investors who value ethical and sustainable investing principles.
There are many socially responsible managers and ETF’s on the market that have an ethical overlay to avoid certain industries, and screen positively for companies that focus on environment, social and governance principles.
SMSF
While there are many corporate, industry and retail super providers offering more investment flexibility, the ultimate form of choice and control of your superannuation investments comes in the form of an SMSF, where you can also invest in direct property, precious metals, unlisted assets, collectibles, cryptocurrency, just to name a few.
In a nutshell, SMSF can suit those who want to directly manage their investments
and are comfortable with compliance, paperwork, and cost.
Summary
For most people, superannuation is a long-term investment so it’s important that you know your options so that you can make an active decision on how your money is invested and how it works for you.
Regardless of whether you choose to invest your super directly via ETFs or managed funds, or through the premixed options, there are various factors you should always consider before making any type of investment. These include:
- your tolerance for investment risk and your return expectations;
- your investment objectives and personal circumstances;
- the length of time you want to invest;
- investment fees and taxes; and
- the investment styles of different products.
As financial planners, we can tailor the investment approach to suit your investment preferences and attitude to risk, while giving you more control over where your money goes.
Direct investments can offer more investment flexibility, but they do come with more responsibility and you will need to keep an eye on performance, rebalancing and making sure your portfolio is adequately diversified.
Shaun Jones MAppFin (FP)
Financial Planner at About Retirement
