“When the system calls itself balanced, check who built the scales.”
When is ‘Balanced’.. balanced?
If you’re a member of a balanced super fund, this is a moment to ask what that really means in practical terms.
“Balanced” super fund members will soon be finding out just how ‘balanced’ their fund is—or is not. I’m going to set out a bit of detail here—not necessarily all in financial jargon, but a broad ‘real-person’ look at investments and this term “balanced.”
I’m doing this now because the massive uncertainty unleashed on markets in recent months will test all that a balanced investment is supposed to hold.
Shattered Guardrails
Clearly, global markets are in a mess right now. The guardrails of normality and reasonable expectations have been knocked down by Donald Trump and the Trump Administration.
It doesn’t matter whether you agree with his worldview or not. The impact of ignoring 80 years of financial expectations is large—and the shockwaves ripple across all levels of investors: large, small, clever, ignorant, or indifferent.
It’s therefore appropriate to have a look at how these ructions are likely to impact Australia’s largest investors—our super funds. Most of their members don’t make an investment decision. They simply end up in the default option—usually a “MySuper” fund. Most of those are called “Balanced.”
It’s my firmly held belief that most people don’t really understand what that term means.
Strategic by Default: How Balanced Super Funds Are Built
Here’s where a bit of technicality helps. Keep with me.
“Balanced” funds are generally structured using a model called Strategic Asset Allocation (SAA). That means investments are selected to suit a specific time frame (say, 10 years) and are held through thick and thin—regardless of whether markets are rising or falling or whether individuals are ready to retire.
The idea is that trying to jump in and out of markets tends to backfire. On average, people do worse when they try to time things.
Most default super options are structured this way – if you’re in a balanced super fund, you’re riding that same long-term strategy whether you know it or not.
But here’s the rub: even if it’s technically solid, it can still be a mismatch for you.
Because what happens if your version of long-term isn’t the same as the fund manager’s?
A Quick Look at Investment Models
Here are the usual options—and a bonus for the realists out there:
- Strategic Asset Allocation (SAA)
A set-and-forget model based on history and stats. Not tailored to you—but usually sufficient. (See this link from Vanguard Australia) - Dynamic Asset Allocation (DAA)
Starts like SAA but adapts to current events. Takes more notice of today’s risks. - Tactical Asset Allocation (TAA)
High activity, high conviction. Fast trades based on bold predictions. Think “sell now” or “buy this, dump that.” - Seat of the Pants
No acronym. No plan. Just vibes and luck. Often adopted by wealthy individuals or accidental investors. Works sometimes. Doesn’t most times. Luck wears a suit, but it’s still luck.
What Even Is ‘Balanced’?
There’s no legally binding definition of “balanced.”
In everyday life, balance suggests an even weight on both sides of the scale. In investing, it means “we’ve taken some risk in exchange for more return.” So the ‘balance’ is usually tilted toward growth—because returns are the prize. For an example, consider AustralianSuper’s PreMixed investment options, where ‘balanced’ does not mean half risky growth and half defensive money.
And risk? Risk means the valuation of your investment can change rapidly and for reasons you may never understand. Share prices are determined by the last trade—which could have been triggered by panic, optimism, algorithms, memes, or need.
If you’re holding strong businesses for the long term, this volatility smooths out. Eventually. But it can be a bumpy ride.
The Delay in Seeing Trouble
Private investments have similar risks—just slower price feedback. They look stable until they’re suddenly not. Public markets tell you when you’ve lost money. Private markets take a little longer.
Modern portfolios mix both. That softens short-term drops but delays the real picture. If the crash is short, you’re protected. If it drags out? You’ll feel it anyway.
The Defensive Illusion
To counter this, portfolios include defensive assets—cash, bonds, term deposits, corporate loans. These are meant to be stable.
But they’re not immune. Bond values swing with interest rates. A 30-year U.S. government bond recently moved more than 13% in just 13 trading days. That’s not your granddad’s definition of “defensive.”
What Happens When Correlation Fails
Balanced portfolios rely on negative correlation—the idea that if one investment falls, another rises.
Bonds were supposed to be that opposite force. And they used to be.
But interest rates went from 20%+ (back in the day) to near-zero, then up again. This churn changes bond values dramatically. In recent weeks, bonds first surged as a safety play—then plunged as people demanded better returns for handing over cash.
The result? Bonds didn’t help. Not enough. Not this time.
A Strategy Isn’t a Life
If you’re still accumulating super, regular contributions (like employer payments) help smooth the ride. When prices fall, your new money buys more. This cushions drops.
But if you’re retired or nearing retirement, and you’re drawing money out? Then drops hurt more. There’s no fresh cash coming in to offset the losses.
Lower prices might be a “buying opportunity” for someone else. But not for you if you’re selling assets to pay bills, renovate, or treat the grandkids. You’re not investing for the long term. You’re living in the short term.
This Isn’t Just a Blip
Maybe this turmoil will fade. Maybe markets will revert to their usual efficient capital allocation rhythm. If so, the noise between now and your next annual statement might not even matter.
But if this is a true regime change—if the foundations of trade and money are being reordered—then it’s going to take more than a year to sort out. And if so, “balanced” is going to feel anything but.
When Balance Super Funds Fail to Hold
I don’t write this to scare you. But I do write it to interrupt the tranquilised default setting that tells you “balanced” means “everything’s under control.”
Sometimes it is. Sometimes it isn’t.
We’re in one of those moments now. And while your fund manager won’t know your favourite coffee mug or your grandchild’s name, you still have to live with the outcome of the choices they make.
The concept of a balanced super fund makes sense on paper – but your life and your needs don’t always exist on that paper.
That’s not a call to panic—it’s just a reminder that even balanced needs watching.
See also :
Guardian article on superannuation amid market volatility
Moneysmart’s Guide to Super Investment Options
⚠️ The Great Disclaimer
Nothing in this post is intended as personal financial advice. It is general and factual information and observations. It takes no account of your personal circumstances and must not be relied upon for making financial decisions.
