Whether you are a 25- year old or a 55 year old, or a cautious or assertive investor, chances are you are in your superannuation fund's default option.
You would expect your fund's "balanced" option, as most of the default options are called, to be a middle-of-the-road compromise between the needs of the 25-year-old with another 40 years of working life ahead and the 55-year-old with 10 years to go.
But the turbulence of the past four years has shown the folly of the one-size-fits-all approach that most superannuation funds apply.
Balanced options have up to 75 per cent of assets in riskier "growth" investments, such as shares and property, though some balanced options can have even higher weightings to growth assets. The typical balanced option has about half of its money in Australian shares and a further 20 per cent in international shares. With Australian share prices still about 40 per cent below their peak in November 2007, it's little wonder the balance on this option - not counting contributions - has flatlined over the past five years.
The typical balanced option has produced an annual average return over the five years to the end of last year of just 0.3 per cent.
The less-risky capital stable options have done better, with annual average returns of 3.2 per cent. The difference between the two is that capital stable options have at least 60 per cent of their money invested in defensive income-producing investments, such as cash and fixed interest. There is evidence that since the onset of the global financial crisis, retirees have been switching to more conservative diversified options.
But pre-retirees also need to take a close look at how they are invested.
No one can say what will happen next in investment markets. But fund members can find out how their investment option is directed.
Most funds provide their asset allocation, expected returns and frequency of likely negative years.
Europe's debt crisis and a likely European recession will slow the global economy and continue to hinder the recovery in investment markets.
That's not a problem for those in their 20s and 30s because they have time on their side and the performances of balanced options will improve. But for those with 10 or 15 years to go until retirement, it's an entirely different matter. They need to review how they are invested rather than flying blind.
Switching to their fund's less-risky options, such as capital stable, should ensure their returns are more predictable. But the downside is the returns could be much lower than those from riskier investment options over, say, a 10-year time frame.
The question on what to do will invariably come down to how much risk you are prepared to take, how long you have until retirement and your lifestyle expectations. But even in the early years of retirement, although the mix will probably shift more heavily to income-producing assets, exposure to growth assets will still be needed to help fund a long retirement.