Choosing the right investment options
25 May 2021
The investment options you choose for your super within BUSSQ can make a big difference to your balance over time1.
Reviewing your investment options to ensure they’re right for you can also be helpful as the investment market or your personal situation may have changed since you last made an investment choice. For example, if you’re nearing retirement, you may want different investment options to those you would have chosen midway through your working life.
When looking at the different investment options BUSSQ offers and choosing the best one for you, there are a number of things to consider.
Think about your investment time frame
Your investment time frame is the period between the day you begin to invest and the day you will need to use your super to live on in retirement. This period becomes very important when choosing your investment option or mix of options. Remember, your investment time frame may not necessarily end at retirement. After retirement, at say age 60, the average person can expect to live at least another 20 years2. So even if you only have a short time until you retire you should consider the investment option or mix of options that will best meet your particular needs well into retirement.
If you don’t intend to access your money for a long time, you may be willing to accept the ups and downs in values that are associated with a higher risk option or mix of options. This could maximise your expected return over the long term. The longer your investment time frame, the more time you have to ride out the ups and downs. If you have a short time frame then stability in the value of your investment may be more important to you.
Understand investment risk
Because your super is invested in financial markets, you are exposed to investment risk. Investment risk is the degree to which returns go up and down in value over time. You cannot consider return without risk and generally, the higher the potential return, the higher the risk.
In order to achieve higher returns, you must be willing to take on more risk1. While shares, property and fixed interest securities might offer higher long term returns than cash, they also expose you to higher levels of risk, particularly in the short term. In financial terms, there is also a risk of not having enough assets or money to provide you with the lifestyle you desire in retirement. Therefore, if you try to avoid risk altogether you may in fact not save enough to provide you with the lifestyle you want in retirement. In fact, your super may not even keep pace with inflation.
Understand your tolerance to Risk
Your tolerance to risk is an important factor to consider before making your investment choice. Everyone has a different tolerance to risk and you need to be comfortable with the level of risk that is associated with the investment option or mix of options you choose. You don’t have to make investment decisions on your own, BUSSQ can help you understand your risk tolerance.
Diversification helps reduce Risk
Because you cannot tell how each asset class will perform over a future period, diversifying or spreading your investments across a range of asset classes has the potential, over time, to smooth out the ups and downs associated with the returns on your investment. The risk/return profile of each of BUSSQ’s investment options is determined by how much is allocated to growth assets relative to defensive assets. The greater the proportion of growth assets, the riskier the investment becomes, but similarly, the greater the potential return over the longer term.
Are you in the right investment option?
If like many of our members you’ve not yet looked at choosing your investment options, or if it’s been a while since you last reviewed your options, we can help. As a BUSSQ member you have access to personal financial advice on investment choice at no extra cost*. Give us a call today on 1800 692 877.
1. Source: https://moneysmart.gov.au/grow-your-super/super-investment-options 2. Source: abs.gov.au/statistics/people/population/life-tables/latest-release *Personal advice is limited to BUSSQ products and is advice on insurance, investment choice, contributions and retirement. The cost of this advice is included in the BUSSQ Trustee related costs and this advice is provided by Link Advice Pty Ltd (ABN 36 105 811 836 AFSL 258145). This information is general advice only and does not take into account or consider your personal objectives, financial situation or needs. Before acting, you should review the relevant Product Disclosure Statement to ensure you have all the information about the BUSSQ product and how it works and consider the appropriateness of the information to your needs or seek independent advice from a properly qualified professional. Prepared by BUSS (Queensland) Pty Ltd (ABN 15 065 081 281, AFSL 237860) as Trustee for BUSSQ (BUSSQ Fund, ABN 85 571 332 201).