Choosing the right investment option

To help keep your super on track to meet your goals for retirement, it's important to understand the investment choices you have for your account and choose those that best suit your needs.

 

What sort of investor are you?

Before thinking about which investments options to choose, it can be helpful to understand a bit more about yourself and your circumstances. Building up some knowledge about your own ‘investor profile’ can be a good start in thinking about what sort of investment options would suit you.

It can be useful to consider a few key questions like these to think about whether a particular investment option is right for you:

  • How long will your super likely be invested before you retire? (As well as how long you may need to keep it invested in order to provide an income after retirement)
  • What level of returns are you hoping to achieve, for example stability and security, or maximum potential growth?
  • How much risk are you comfortable with?

Generally you’ll need to consider these factors (and others) together to help determine which options might suit you needs. It can be risky to make decisions based on one factor alone, as levels of risk, returns and timeframes are often related.

 

Finding the options that suit you

While investment options can often look similar, each one generally has a different investment objective, which is simply the level of investment returns it’s aiming to achieve.

Having different investment objectives also means each option probably invests in a different range or mix of assets and therefore has a different level of investment risk.

When choosing an investment option or combination of options, it’s important to understand how the level of investment risk and potential return for each option might affect your investment in the short term and long term.

For example:

  • The value of options with higher investment risk (eg. our Moderate, Balanced, Growth, Australian Shares and International Shares options) might rise and fall (either a little or a lot) in the short term but they also generally have the potential for higher average investment returns in the long term.
  • The value of options with lower investment risk (eg. our Cash, Fixed Interest and Conservative options) can be more likely to have more consistent or stable returns in the short term but lower potential average returns in the long term.

Understanding how this risk/return relationship works with your investment timeframe is helpful in choosing investment options.

For example, a 35 year old who’s likely to have their super invested for another 30 or 40 years may prefer a higher growth investment option because they have sufficient time to ride out any short-term fluctuations in investment market performance. But someone who’s 1-2 years away from retirement may not be as comfortable with this level of risk and therefore may want to invest part of their super in a lower risk investment option.

It’s also important not to forget about how long your super will be invested overall. One risk may be that people invest too conservatively over the long term, feeling like it’s better to be safe than sorry. However, more conservative options may not generate as much growth in savings over the long term, resulting in super savings running out sooner than expected during retirement.

 

For more information

Looking for help or advice about choosing investment options?

If you have questions about choosing investment options for your account, you may want to talk with our Advice team over the phone. There is generally no additional cost to you to use this service for advice relating to investment options in your account in the fund.

Find out more

Other useful resources

    How to make good investment choices

    We all like making good investment choices when it comes to our money, but is there an easy way of going about it? (Source: Colonial First State)

    What's your investment life stage?

    Whether you’re a long–term investor or just starting out, it can be easy to leave your investments undiversified. We’ve broken down each decade to help you understand some of the financial considerations. (Source: Colonial First State)

    Time holding an asset can be the most effective strategy

    There can be a million justifications for shifting money around for short term need, but investing for a longer time frame has more value than just managing your risk. (Source: Financial Planning Association of Australia)