All investments, including super, involve a certain level of risk. But not all risk is bad.
One of the keys to successful investing is to take on risk that is appropriate for your circumstances.
Investment risk can come in many forms. One type of risk is the chance that your investment will drop in value as investment markets change.
Generally, higher returns are accompanied by greater risk. So the more you can earn from an investment over time, the more likely that investment may rise and fall in value – sometimes dramatically and over short periods.
To help you understand the type of investor you are and how you feel about risk, AustralianSuper has developed an online Risk profile quiz.
You can find out more about managing risk in our Investment Choice Guide.
Asset classes and risk
Asset classes (types of investments) have different levels of risk and potential return. Shares and property historically have provided strong returns over the long-term, but over the short-term the value of these assets can move up and down a lot.
The extent to which values can change is known as ‘volatility’ – the more volatile the asset class, the more its value can change in the short-term, which also makes it more risky in the short-term.
Cash and fixed interest historically have been less volatile– with less likelihood of a negative return. But over the long-term the risk is they may provide a lower return than shares or property, so you may have a lower return over time.
To choose an investment strategy, it is important you understand what level of return to expect and the level of associated risk.
Find out about the risk profile of each AustralianSuper investment option.