What is indexed investing?

You now have two more ways to choose how your money is invested.

Alongside our existing Indexed Balanced option, two new indexed investment options are now available to members with an Accumulation, Pension or Transition to Retirement Pension account.

Together, these provide three low-cost indexed investment options to choose from.

They offer a straightforward way to invest in a share market, with generally lower investment fees than actively managed options.

The existing International Shares and Australian Shares options will remain available. The new indexed options provide a different way to invest.

Our existing Indexed Balanced option will also remain available. While Indexed Balanced invests across passively managed Australian shares, international shares and fixed interest investments, the two new indexed options are focused entirely on shares in a single market.

Here is how they work and what to consider before making a choice.

First, what is a share?

A share is a small piece of a company.

When you invest in shares, their value can rise or fall depending on how the company and the h2share market perform.

What is an index?

Think of an index as a scoreboard for a group of companies.

It shows how the combined value of that group of companies are changing over time. Different indexes follow different groups of companies and markets.

How indexed investing works

Instead of an investment manager choosing which companies may perform best, the option invests across the companies included in the index.

When the index rises, the value of the investment option will generally rise. When the index falls, the value of the option will generally fall.

This means the option is intended to broadly follow its index. Its performance may differ because of fees, costs and practical differences in how closely it can track the index.

Indexed and active investing: what is the difference?

The main difference is how investments are chosen.

What are the possible benefits?

What should you consider?

The options follow the market down as well as up

An indexed option aims to closely track its chosen index, including when some of the companies in that index are performing poorly.

If the market falls, the value of the option is also likely to fall.

Share values can change significantly

Shares can rise and fall sharply over shorter periods. There may be years when the option has a negative return and your account balance falls.

How comfortable you are with these changes is an important consideration.

They only invest in shares

The options spread your money across different companies, but they do not spread it across different types of investments.

This is different from a diversified option such as Indexed Balanced, which invests across passively managed Australian shares, international shares and fixed interest investments.

An indexed option aims to follow its chosen index. It does not aim to avoid market falls or select investments that may outperform the market.

Can you combine them with other options?

Yes. You can invest in one option or combine different Brighter Super investment options.

For example, a share option may form one part of a broader investment mix. The right mix will depend on your goals, timeframe and how comfortable you are with investment risk.

Do you need to make a change?

No. The new options provide more choice, but you do not need to change anything if you are happy with how your account is currently invested.