Investment styles
Choosing the right kind of investment comes down to your personal situation and your attitude to managing money.
Invest to suit you
Factors to consider in making an investment choice include:
Your age
If you are a long way from retiring, you have time to ride out the ups and downs of the markets. This means that you may feel more comfortable investing in riskier assets, like shares and property, to take advantage of the higher returns they are expected to produce over time.
If you are only a few years from retiring, you may prefer a less risky approach to protect the value of your investment. Investing in fixed interest and cash is less risky than investing in shares and property, but it usually gives lower returns.
When you do retire, it is still important to think about your investment. You will need to invest your money to keep you going for many more years.
Your savings goal
You may need less money to live on when you retire than you do now. You may have paid off the mortgage, you have no more work-related expenses and the children may be looking after themselves. Even so, you will want to maintain your everyday lifestyle once you retire and you will have more time to do all those things that you never got around to doing before. The age pension may give you only a small part of what you need. Your investments (your super and other savings) will need to provide enough income to cover the rest.
Your investment style
Are you more conservative or more aggressive? More conservative investors prefer fixed interest and cash, so that their money works steadily and without big changes in their returns from year-to-year. The trade-off for investing cautiously is usually lower long-term returns.
A more aggressive investor is prepared to take more risks in exchange for higher expected returns in the long term. They invest mainly in shares and property and accept that poor or negative returns can happen from time-to-time.
You may be more conservative by nature, but a long way from retiring. Similarly, you could be more aggressive, but close to retirement. In choosing your investments, you need to strike a balance between your investment style and financial needs.
Follow your investment plan
The most sensible approach to investment is to make a long term plan and stick to it. You should avoid making hasty decisions or trying to second-guess investment markets. These can lead to losses and lost opportunities. At the same time, it is important to regularly monitor and review your investments to take account of any changes in your personal circumstances.
Have a mix of investments
Some investments are high risk. Some are low risk. At any given time, there are winners and losers. High-risk investments may give good returns, low risk investments may not. It could be the other way round.
With that in mind, imagine having all your money in one kind of investment, say shares. Imagine how happy you would be if shares do really well. Now imagine how you would feel if the bottom fell out of the share market and the negative returns made your money go backwards. Not happy at all!
Having a mix (or diversification) of different investments may be a better approach. That way, investments that do well may offset some of the other investments that are not doing so well.
Look at the big picture
Your super may be your biggest investment, but you may have others too. These may include your house, an investment property, shares or a term deposit at the bank. It is a good idea to strike a balance with all of your investments. For example, if you have a property and some shares outside your super, you may want to be more cautious with your super investment.
Consider the fees you pay
How much you pay in fees is one of the most important things to understand about super. Making sure your money isn’t eroded by fees will help you get the most out of every dollar you save.
See low fees for the fees that apply to TWUSUPER members.