Investing your super
How do I make a choice?
With so many investment options to choose from, how do you know which option is right for you? First, you need to consider the relationship between risk and return, and then determine what type of investor you are.
Risk and return
Experienced investors understand that those investments that deliver high returns generally come with a higher level of risk. But what kinds of risks are there, and how can they affect your super investment? Read more...
What type of investor are you?
It's important to carefully consider how much risk you are willing to take in order to achieve a good return on your investment. Read more ...
Risk and return
What goes up can also come down
Everyday we see news about share markets and their movements. They rise and fall. When investing in super, there will always be some element of risk involved, such as the possibility of losing some of your money. But there is also another type of risk – the risk that the value of your investment won’t keep up with inflation.
Here are some types of investment risks and how they could affect your super investment:
Negative earning rates
In the short term, your account balance may go backwards with negative earning rates. Over the long term though, your account balance should increase with investment returns. Remember, super is an investment that spans over 40 years of working life, and beyond.
Inflation
There is a possibility you won’t earn enough to keep the balance of your account ahead of inflation. This reduces the balance of your account in ‘real’ terms.
Currency
Your account balance could be affected by changes in currency exchange rates if the fund does not invest on a hedged basis.
Interest rates
If interest rates rise or fall, your account balance could be affected.
Legislation
Governments might change or introduce new legislation. This could affect your account balance, access to super or its tax treatment in a positive or negative way.
Investment markets
The entire market could decline at the same time - not just one or two types of asset classes. This could affect your account balance.
Security specific
One specific investment, such as shares in a particular company, could experience a major drop in value. This risk is reduced through diversification of investments.
Economic/political
If countries and regions experience political change, economic crisis or war, there is a risk your account balance may be affected.
Opportunity
By making one investment, you could be missing out on another investment with better opportunities for growth.
Socially responsible
By avoiding investments that do not meet socially responsible criteria, you could miss out on higher investment returns, and/or increase risk. This is because socially responsible criteria limit the pool of investments an investment manager can select from. What's more, the additional costs associated with socially responsible investing can be significant.
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What type of investor are you?
Find your comfort level
All investments are designed to deliver a return, but experienced investors understand that lower risk investments generally mean lower returns, while higher risk investments generally mean higher long-term gains. It’s important to carefully consider how much risk you are willing to take, in order to achieve a good return on your investment.
So where do you fit in?
What type of investment suits you?
Do you prefer a safe investment, even if it means a consistently low return? Or are you happy to experience periods of negative returns, if it means your long-term gains will be higher? Or maybe you favour something in between.
How long do you expect your money to remain with LGsuper?
The longer the investment timeframe, the more risk you can tolerate, as you have time to recover from short-term fluctuations. And remember, even after you retire, your investment might have to last another 20 to 30 years.
What level of income do you require in retirement and will you have enough?
A higher-risk option may get you to your retirement goal sooner, but you need to be comfortable with negative returns over short periods.
LGsuper offers a range of investment options covering all levels of risk and return. Take a look.
