What risk means for your super
No investment can ever be guaranteed to perform well. The nature of investing means there’s always the potential for your investment to lose value from year to year.
Over the long term, you can think of risk as the chance that the rate of return on your investments might not be enough to provide you with the income you’ll need in retirement.
The appropriate level of risk for you will depend on your age, how long you’re investing for, what other assets you might have outside super and how they are invested, and how comfortable you are with the possibility of losing some of your investment in some years.
Consider how long you’ll need to invest
When choosing your investment plan, the amount of time you want to invest for may impact how much risk you’re willing to take. You don’t need to choose the best performing investment plan. You need the one that best suits your investment personality and your goals.
Risk and return are closely related
Generally speaking, the higher the potential return from an asset over time, the higher the potential risk.
The Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council have created the Standard Risk Measure to help members compare the potential risk of various investment plans.
Readymade plans for West State Super
Shown below are the Readymade and Mix Your plans for West State Super, and where they sit on the risk scale compared to each other. The plans are positioned on the chart based on their risk level.
You can see that the Readymade Growth plan is lower risk than Mix Your plan Australian Shares. That's because the Growth plan also includes assets like Investment Grade Bonds and Cash which bring the risk down. The combination of high risk and low risk assets set the risk level for each Readymade plan.