Method workshop · Passive
Passive Inside Super, and the Problem with Index Hoppers
Most working Australians already run a hands-off, diversified strategy through their super, whether they chose it or not. Switching between index products or investment options after a bad year is still active decision-making, just with fewer clicks.
If you have super in a default or diversified option, contributions go in automatically, the money is spread across asset classes, and someone else rebalances it. Some options use index funds, some use active managers, many use both. Either way, from where you sit it's a set-and-review approach.
That's worth knowing before you build a separate "passive portfolio" outside super. You may already own much of the same market exposure.
Check what you already hold
Your fund's website shows the asset allocation for your option: Australian shares, international shares, property, bonds, cash, unlisted assets. Add up the share exposure inside and outside super. Many people discover they're far more heavily in shares, and far more heavily in Australian banks, than they realised.
The index hopper
Here's a familiar pattern. Shares fall. The investor switches their super from "growth" to "conservative" or to cash. Markets recover. They switch back after the rebound, having missed part of it. Or they move from an Australian index ETF to a US tech index because the US did better last year, then to something else the year after.
Each switch feels like a sensible tidy-up. Together they're market timing. The products are passive. The investor isn't.
When switching is fine
Changing your option or your mix because your levers moved is legitimate: retirement approaching, a change in wealth stage, a written plan that says to de-risk at a certain point. The test is whether the reason is about you or about recent performance.
- About you: "I retire in three years and need a cash buffer."
- About performance: "It's been a terrible year and I can't watch it any more."
The second one is understandable. It just isn't a plan.
Costs and tax
Switching options inside super can trigger costs inside the fund, and switching ETFs outside super can trigger brokerage, spreads and capital gains tax. Check your fund's product disclosure statement and current tax rules before moving.
What to do with this
Write down your super investment option and its share allocation, then add your shares outside super. If you've switched options in the past five years, note why. If the answer was recent performance, write the rule that would have stopped you.