Investment basics

The way your super is invested can make a huge difference to the amount of money you have in retirement. Getting to know some basic investment principles can help you understand your options so you can make better investment choices.

Have you considered…

  • the likely return of your chosen option/s?
  • the level of risk you are taking?
  • how long you are investing for?
  • if you’re selecting more than one investment option, the overall asset allocation and risk profile the combination of options will produce?

For more information on these issues and LGIAsuper's full range of investment options read our Investment choice guide.

Download Investment choice guide

Risk and return

Every day we see news about sharemarkets and their movements. They rise and fall. When investing in super there will always be some element of risk involved, such as the possibility of losing some of your money. There is also the risk that your investment won’t keep up with inflation.

Here are some types of investment risks and how they could affect your super investment.

  • Negative earning rates

    In the short term, your account balance may go backwards with negative earning rates. Over the long term though, your account balance should increase with investment returns. Remember, super is an investment that spans over 40 years of working life, and beyond.
  • Inflation

    There is a possibility you won’t earn enough to keep the balance of your account ahead of inflation. This reduces the balance of your account in ‘real’ terms.

  • Currency

    Your account balance could be affected by changes in currency exchange rates if the fund does not invest on a hedged basis.

  • Interest rates

    If interest rates rise or fall, your account balance could be affected.

  • Legislation

    Governments might change or introduce new legislation. This could affect your account balance, access to super or its tax treatment in a positive or negative way.

  • Investment markets

    The entire market could decline at the same time - not just one or two types of asset classes. This could affect your account balance.

  • Security specific

    One specific investment, such as shares in a particular company, could experience a major drop in value. This risk is reduced through diversification of investments.

  • Economic/political

    If countries and regions experience political change, economic crisis or war, there is a risk your account balance may be affected.

  • Opportunity

    By making one investment, you could be missing out on another investment with better opportunities for growth.

  • Socially responsible

    By avoiding investments that do not meet socially responsible criteria, you could miss out on higher investment returns, and/or increase risk. This is because socially responsible criteria limit the pool of investments an investment manager can select from. What's more, the additional costs associated with socially responsible investing can be significant.

Investing in volatile markets

While volatility in the markets can be unsettling, it’s important not to panic. It is the nature of markets to move up and down over the short term. Long-term investment goals can be impacted when decisions are based on short-term market movements.

All financial markets exhibit some degree of risk, however some asset classes are more exposed to risk than others and can be affected by market volatility.

At LGIAsuper we continue to review all our portfolio holdings to ensure our exposures are the right ones for the long term. Our investment strategy has been positioned to minimise the effects of volatile markets on your super.

Here are our tips for investing in volatile markets.

  • Diversification is key

    Diversification reduces the exposure to any one particular asset or risk. Exposure across different assets can help reduce the volatility of any one particular asset class on your super savings.

    LGIAsuper’s ready-made investment options (including our default investment option for Accumulation accounts, MySuper Lifecycle) are highly diversified, with allocations to global and domestic sharemarkets, infrastructure, property, fixed income, cash and alternative investments. Sharemarket movements impact only part of the overall returns of LGIAsuper's default investment options. This means a fall in one asset class may be offset by better performance from another asset less prone to volatile movements. And within asset classes, we diversify even further by spreading investments across different investment managers and strategies, as well as different industries and sectors. 

  • Consider your investment timeframes

    Every financial investment carries with it an element of risk. When making investment decisions, it's important to consider the timeframe over which the investment will be made, as well as your own personal set of circumstances. Your investment timeframe impacts the expectation of return or reward of the investment decision as well as the level of risk that can be tolerated.

    Superannuation is generally a long-term investment, intended to support your income in retirement. If you are planning to access your super in the short term, your investment timeframe will be reduced for the portion of super you intend to draw which may influence your investment decisions. 

  • Threat or opportunity

    Our news stories will keep you up to date with LGIAsuper news and events, and provide you with information that will help you make the most of your super.

  • Stay informed

    Our news stories will keep you up to date with LGIAsuper news and events, and provide you with information that will help you make the most of your super.

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