Investing your money
Investing your money is a personal decision based on your expectations when it comes to risk and return and how long your money will be invested, which in turn will affect the type of assets you invest in. Here are some pointers when it comes to investing – things to think about before you get started.
Risk and return – how much risk are you prepared to take?
Risk and return are fundamental to investing, you can’t have one without the other. ‘Investment return’ is what an investment earns over time and ‘investment risk’ is the degree to which these returns may fluctuate over time. It’s a feisty relationship, the bigger the risk the higher the return, and vice versa, the lower the risk the lower the return – it’s as simple as that!
To help you assess risk, each of the investment options have what’s known as a standard risk measure.
Asset classes – what type of assets are you comfortable investing in?
Super can be invested in various asset classes that are commonly known as defensive assets (lower risk) or growth assets (higher risk). Within each group there are a number of different types of assets. The option you choose may be diversified across a number of assets or invested in just one, learn more about your options and their asset allocation.
Diversification – looking to spread your risk across assets?
Diversification is a key strategy when it comes to managing risk, it basically means spreading your money (and risk) across different asset classes. If one asset class or investment falls in value, others that are performing well may make up for the loss or at least reduce the impact.
To help you spread your risk there are a number of diversified options with different risk/return profiles for you to choose from. Your investment timeframe, whether short term or long term, will influence the level of risk you may be prepared to take.