Your superannuation fund is more than just an asset. It’s potentially made up of many different assets, depending on how you choose to invest it. A lot of people set up their superannuation fund and then forget about it for large periods of time, allowing the money to be invested in the fund’s default investment option. If you personalise the investments, however, your super could perform even better.
A super fund will offer you a variety of investment options, and it is your responsibility to understand the assets your fund is invested in and the risks associated with each. It’s also important that you choose investment types that are suited to your needs, especially if you’re looking for a conservative, low-risk approach. The following are some tips to help you find low-risk investment options for your super.
The Relationship Between Risk and Return
The risk that is associated with different investments is generally reflected in the return. If you’re looking into low-risk assets for your super, then you can expect far more stability, but lower returns for the asset as well. In general, people will make less risky investments over the short term because the returns are more or less guaranteed.
On the other hand, more volatile assets may be high risk, but tend to have a much higher return over the long run. While you can get advice or get trained in the shares or forex basics, for instance, if you’re not able to put in the time to learn about the riskier options, it’s always best to play it safe.
Types of Low-Risk Investment Options for Super
Here are the best options if you wish to have less risky investments for your super:
- 1. Cash – The cash sector comprises assets that offer a fixed rate of return and shorter investment time frames. Investments of cash are generally considered to be low risk and can produce a more dependable income. Some good examples include on-call accounts, cash management accounts/trusts and term deposits, which all have a low potential for capital loss.
- 2. Fixedinterest – There are a number of investment options in the fixed-interest sector, all of which offer something different in terms of yield, security and flexibility. People choose these investments for the higher level of security they offer and their strong income stream, despite the low potential for significant capital growth. Fixed-interest investments include government bonds, mortgage trusts and longer-term, fixed-term deposits.
- 3. Property – While a little bit more risky than fixed interest and cash investments, the property investment sector still offers a lot of security. Common assets include commercial, retail, industrial and rural real estate, as well as listed or unlisted property trusts. Property investing can sometimes be volatile, depending on market conditions, but there is plenty of room for you to control your own investments.
Picking an Investment Strategy that is Suitable for You
Throughout your life, the best investment strategy will change and evolve. In general, many people take more risks with their investments when they’re young because they have a lot of time to make up for potential losses. On the other hand, those who are fast approaching retirement often choose the aforementioned conservative investments, so that they can maintain some growth while reducing risk.
Given this, it’s important that you choose the right investment to suit your stage in life, as well as one that suits your risk tolerance. By talking to an investment advisor, you can choose the investment – or investments – that will be the best for you and your money.