risk and your age

Having a super account means you’re an investor, and that involves taking on investment risk.

Investing in super carries various levels of risk, depending on the investment options you choose. All investment options experience ‘volatility’, which means the value of investments will rise and fall with market conditions.

Some investment options are more volatile than others. It is important to choose an investment option that you are comfortable with and that suits your expected minimum investment timeframe.

Your attitude to risk, or your ‘risk profile’, may change over time with your life circumstances and financial situation.

Investing in higher risk options requires you to be comfortable experiencing relatively higher volatility and recognise that your investments may rise or fall in value significantly at any point in time.

Types of investments

Investments are generally divided into two different types: growth and defensive.

Growth investments can carry more risk and include assets like shares and private equity. By investing in growth assets, you might see more ups and downs in your super balance in the short term, but you might also see it grow higher overall in the long term.

Defensive investments, such as cash, bonds and term deposits, carry lower risk. These types of investments might suit short-term investors because they tend to fluctuate less, but they are also generally expected to achieve lower returns.

To reiterate, ASIC has said:

Why age matters

Taking on risk can be uncomfortable. Research shows that a person’s comfort level when it comes to taking on investment risk has been proven to grow with age and income level.^* It’s also been shown women may find investment risk more difficult to take on than men.^{^}

We all know that superannuation is a long-term investment. You likely opened your first super account when you started your very first job.

If you're investing for the long term, you may have more time to recover from any falls in the markets. If you’re investing over the short term, it may be beneficial to invest in assets that are expected to fluctuate less in value.

Time is one of the most powerful factors you have when it comes to super investment decision-making. Let’s look at two very different hypothetical member scenarios.

*Gallery, Newtown & Palm 2011, Clark-Murphy & Gerrans 2004.

^ Wilkins 2014, Lemaster & Strough 2014.