Choosing the right investment option
When it comes to choosing an investment option, the two main things you need to consider are 'how long your money will be invested' and 'how comfortable are you with investment risk?'
1. How long will your super be invested?
The length of time your superannuation will be invested is usually from the time you invest it in the option until you can access your super upon retirement. Your investment time frame is likely to be:
- Short-term – if you intend to retire in less than three years
- Medium-tern – if you intend to retire in three to seven years
- Long-term – if you intend to retire more than seven years from now.
Generally, the longer your investment timeframe, the more time you’ll have to ride out any ups and downs in the short-term. This means you may be suited to a higher growth investment option. If you’re planning to retire in the next few years, your super might be a shorter-term investment. This means it might not have time to bounce back from any poor or negative investment performance – so you might be more suited to a lower growth, lower return option.
2. How comfortable are you with investment risk?
There’s no such thing as a risk free investment. The level of risk you’re comfortable with depends on the type of investor you are. If you’re happy to accept a higher risk investment option, that has a greater chance of performing well over the longer term, you might be suited to a higher risk option. However, if the thought of a negative return would keep you awake at night, you might be more suited to a lower risk, lower return option.