Risk and return

The relationship between risk and return is fundamental to investing.

Investment return is what your investment earns over time and investment risk is the degree to which these returns may fluctuate over time. Generally, risk and return go hand in hand – the greater the potential return, the higher the risk.

Each investment option has a different mix of assets. The asset mix determines the risk and return profile, so the degree of risk will vary between the investment options. The investment options offer specific investment strategies designed to cater for members' differing investment objectives, risk levels and timeframes.

It's important to compare the risk and return profiles of each of the investment options with your own risk tolerance when selecting an investment strategy.

Investment risk

As with any investment, investing in superannuation does carry a degree of risk. The degree of risk will vary depending on the asset mix of your selected investment option.

Lower risk investment options

Investing in lower risk investments may suit you in the short term, however you should be aware that over the long term you may miss out on opportunities to maximise returns and your investment may not keep pace with inflation.

Higher risk investment options

If you choose to invest in the higher risk options, there is the danger of that choice working against you in the short term. While higher risk investments may generate higher returns over the longer term, they can also generate substantial negative returns from time to time.

Diversification – a way to manage risk

Diversification is when money is spread across a number of different investments. Therefore, if one investment falls in value, others that are performing well may make up for the loss or at least reduce it.

Maritime Super maintains a diverse range of investments across a broad range of asset classes, investment managers and countries to reduce your exposure to risk. As a large investor, we can achieve diversification across a wide range of investments, which our members may not otherwise be able to access individually.

Currency

Currency risk arises when fluctuating exchange rates affect the value of overseas investment and therefore your investment return.

Part of Maritime Super's exposure to overseas assets may be converted back to the Australian dollar as a way of managing currency risk.

Derivatives

Derivatives are investments that derive (get) their value from an underlying asset, such as bonds or shares. Experienced professional investors may buy or sell derivatives to help manage the risks of the underlying asset and protect against, or profit from, investment volatility. Examples of derivatives include futures and options.

Derivatives may be used by the investment managers in applying hedging strategies and risk management strategies that are within established guidelines set by the Trustee. The investment managers are not able to use futures, options or other derivative investments for high-risk speculative purposes or to gear the investments of the Fund.