What type of investor are you?
How you choose to invest your money will depend largely on the type of investor you are. When it comes to super, there are three key considerations in choosing the right investment for you:
- How long you’re investing for.
- How hands-on you want to be when managing your super.
- How much investment risk you're comfortable with.
1. How long do you want to invest for?
Your investment timeframe is how long you plan to invest your super savings before you retire, as well as how long you want your savings to last once you do retire.
Even if you don’t know when you'll retire, thinking about your investment timeframe can help you choose an option that matches your goals.
2. How hands-on do you want to be?
Choosing the right investment can impact how much your savings grow and how long they last. Before making your choice, you need to know how much direct control you want over your investments – or how 'hands-on' you want to be.
You can choose from three different investment options, each with a different hands-on level:
- PreMixed - Hands-on level: Low
- DIY Mix - Hands-on level: Medium
- Member Direct - Hands-on level: High
3. How much risk are you comfortable with?
Different investment timeframes and options come with different risk levels. An investment’s risk level largely depends on how long you invest in it.
- Within a short timeframe (five years or less), the main risk to your investment is short-term fluctuations that could reduce your savings.
- Investing over a longer period (20 years or more) means that your investments will probably have time to ride out short-term ups and downs. Your main risk over the longer term is keeping up with wage inflation.
Different types of assets also have different levels of risk. Consider how you might offset this risk by selecting diverse investments.
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Types of risk
Adequacy
The risk that your super savings won’t provide enough retirement income for as long as you’ll need it.
Agency
The risk that the third parties who manage investments and the administration for AustralianSuper do not perform as expected.
Credit
The risk that the issuer of a security (like a bond) doesn’t pay back the money borrowed when it is due.
Currency
Movements in exchange rates can impact the value of your investments. For example, an increase in the Australian dollar compared to other currencies can reduce returns on international investments. A lower Australian dollar can improve returns on international investments.
Inflation
Inflation risk is when your investment returns don’t grow above inflation to meet your long-term income requirements. Types of inflation include price inflation, which is a measure of the changes in the prices of goods and services and wage inflation, which is a measure of changes in the amount people earn.
Interest rate
Interest rate movements can impact your investment returns. Interest rate risk is the potential for losses in response to a change in interest rates. There is an inverse relationship between fixed interest security prices and interest rates (yields).
Liquidity
The risk that your investment can’t be sold at the right time or when you need your money.
Market risk
The risk of loss due to movements in the financial markets.
Market timing
The risk that you buy or sell your investments at the wrong time. For example, if prices are low when you sell you may lose money. If you wait until prices pick up before you buy, you might miss the market upswing and it might take longer for the value of your investment to grow. This can be a risk when switching investment options.
Policy
The risk that changes to super rules and industry regulations will impact your investment.
Longevity
The risk that you'll outlive your retirement savings.
Sequencing
Sequencing risk relates to the order and timing of your investment returns. Experiencing negative returns when you’re early in retirement can significantly impact how long your retirement savings last. You may not have as much time to recover from market downturns and you won’t be getting ongoing super contributions to help offset this risk.
Volatility
A measure of the rise and fall of an investment. An investment that has larger price fluctuations has higher volatility and is considered more risky. Volatility can be measured by standard deviation, which is the variation of returns around the average or expected return.
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Standard Risk Measure
The short-term risk level is the same as the Standard Risk Measure, which is used across the super industry to help members compare the risk levels of investment options.
The short-term risk level classifies investment options according to their likelihood of negative returns.
The short-term risk level is calculated by:
- Estimating the probability of an investment option delivering a negative annual return in any one year and multiplying this by 20. This provides an estimate of how often you can expect to receive a negative annual return in any 20 year period.
- Investment options are then categorised into risk levels and bands based on their expected frequency of negative annual returns as follows:
Risk level (label) Number of negative annual returns over any 20 year period Risk band Very Low Less than 0.5 1 Low 0.5 to less than 1 2 Low to Medium 1 to less than 2 3 Medium 2 to less than 3 4 Medium to High 3 to less than 4 5 High 4 to less than 6 6 Very High 6 or greater 7 -
Medium-term risk level
The medium-term risk level is a combination of the short-term risk level and the long-term risk level.
Over the medium term, both volatility and inflation can be a risk so you may need to find a balance between the two. While you have a longer period to recover from potential market falls, there's still a possibility that your super savings could be reduced by market volatility. At the same time, you may need to choose an option that has the potential to grow your super savings above wage inflation over time to meet your objectives.
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Long-term risk level
The long-term risk level is determined by considering the likelihood of investments in each option to produce returns in excess of wage inflation.
Each option is given a rating from the following table.
Risk level Probability of underperforming inflation Low Less than 10% Low to Medium 10% to 20% Medium 20% to 30% Medium to High 30% to 40% High 40% to 60% Very High Greater than to 60% -
Investment risk assumptions
The risk levels are based on investment return modelling. The model takes into account a wide range of economic and investment market factors including inflation, expected asset class returns, volatilities and cross correlations between asset classes. It is based on and calibrated against Australian and international experience, often going back over 40 years. For unlisted/alternative assets, where historical data is limited, a range of proxy measures are adopted and overlayed with knowledge and judgement to calibrate their return distribution.
Where necessary, asset class returns have been adjusted to take into account the characteristics of AustralianSuper’s investment portfolios. We have assumed that each PreMixed option is rebalanced to its Strategic Asset Allocation each year. The risk profile of an investment option may change from time to time due to the active asset allocation adjustments within the portfolio.
The returns are net of contributions and earnings tax and investment fees (excluding investment performance fees). Fees are indexed annually to price inflation using the CPI and contributions are indexed to wage inflation. Unusual future events may cause different results.
Managing risk over the short and long term
Your investment time-frame is a factor when considering volatility risk. While Cash has been steady over the last 20 years, it's also grown less than assets like shares. If your savings are growing too slowly, they might not keep up with the rising costs of living.
Australian shares grew strongly over the same period of time, but if you look at shorter time frames like the Global Financial Crisis in 2008/09 or the COVID-19 downturn in 2020, you can see that shares can be risky as well as rewarding. The chart shows that $50,000 invested in Australian Shares (S&P/ASX 200 Index) over the 20 years to 30 June 2023 would have grown to $278,804, while the same investment in Cash (Bloomberg AusBond Bank Bill Index) would have grown to $98,914.

Prepared by AustralianSuper, based on information available as at 30 June 2023, sourced from the following market indices: Australian shares - S&P/ASX 200 Index; Cash - Bloomberg AusBond Bank Bill Index. Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection herewith.
Our top five tips for managing risk
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Mixing it up can help
Investing in a mix of investments (diversification) can help protect your investments against market ups and downs. Spreading your investments across a variety of companies, industries and regions in different asset classes can help reduce the risk of negative returns.
Diversification is particularly important to consider if you’re planning to build your own strategy with our DIY Mix options or invest your own super using Member Direct. Our PreMixed options are already diversified and each option has a different mix of assets.
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Focus on your long-term needs
Watching your super balance go up and down can be unsettling. While it can be tempting to change investment options when markets are down, it isn’t always the best approach. Investments that are volatile over short periods of time may have the potential to grow more over longer periods.
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It’s normal for markets to change
Most investments go up and down over time. Market movements can mean the asset allocation of your portfolio moves away from its original strategy and changes your risk level.
In our PreMixed options, we actively adjust the asset allocation so it reflects our strategy. If you invest in our DIY Mix options or Member Direct, you’ll have to manage this yourself.
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Review your strategy
When your circumstances or objectives change, it’s a good idea to review your strategy to ensure it’s still right for you. For example, you might be nearing retirement and need to access some of your super in the short term.
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Consider seeking financial advice
The best option is the one that suits your investment timeframe, circumstances and goals. A professional financial adviser can help you develop an investment strategy to meet your needs, which could make a big difference to your retirement savings over the long-term.