For many of us, our super will be one of the biggest investments we ever have. And it may also be the key to our financial security later in life.
So it’s a good idea to have an understanding of how investments work, so you can be more confident when it comes to choosing investments that will best suit your needs.
Different types of investments are broadly grouped into asset classes. These are essentially the building blocks of an investment portfolio. The main asset classes include shares (or equities), property, infrastructure, fixed interest, cash, and alternative investments.
Investments in these asset classes have different characteristics. They’re often broadly defined as being either ‘growth’ or ‘defensive’.
Asset classes like cash and fixed interest are sometimes described as defensive investments. They carry less risk, but they also offer less potential for high returns.
Australian and overseas shares are generally described as growth investments. They tend to offer higher returns than defensive assets, especially over longer timeframes, but they come with a correspondingly higher level of risk.
Some people think of their super as a single asset, but it can potentially be invested in many different assets. Catholic Super offers both diversified investment options, which invest across a number of different asset classes, and sector-specific investment options, which invest in a single asset class only.
All investments involve some level of risk. Generally speaking, the higher the returns expected from an investment, the higher the risk associated with that investment. The lower the returns – the lower the potential risk. It’s often referred to as the risk and return trade-off.
You can find out more about how risk affects your investments, and how we manage risk, in the PDS for your Catholic Super product, as well as our guide for members – How we invest your money.
It’s impossible to predict with any certainty which asset class will perform best in any given year. Diversifying – or spreading your investments across a range of asset classes – can help to reduce the risk of a loss if one of the asset classes in your portfolio performs poorly.
At Catholic Super, diversification is at the forefront of our investment strategy. Not only does it allow us to combat the impacts of volatility, it also better positions us to take advantage of investment opportunities in different asset classes as and when they arise.
Each asset class has varying timeframes for investment, based on the level of risk and return. For example, more defensive assets such as cash or fixed interest tend to be lower risk, but they also generally don’t offer high returns. This relative stability when compared with growth assets can make them more favourable to investors with a shorter timeframe to invest.
Growth assets, on the other hand, can be more volatile over shorter timeframes, with frequent changes in value. Over the longer term, however, those individual ‘bumps along the way’ tend to even out, and they typically produce higher returns overall.
Investing in super, and even investing through retirement, is a long-term investment, and our focus as a fund is to provide solid, long-term investment returns for our members.
The investments you choose today can make a significant difference to the retirement you get to enjoy tomorrow.
The investments you choose today can make a significant difference to the retirement you get to enjoy tomorrow.
On a roll? Why not build your knowledge even more with these interactive modules on super, retirement, investing and more, as well as information tailored to your life stage.
If you’ve got any questions about your Catholic Super investment options and how we manage your money, our team is ready to help.
