Your super is your money, so it pays to understand how it's invested.
Choosing how to invest your super is a personal decision that comes down to your specific circumstances and appetite for taking risks.
In investment terms, risk refers to the chance that the actual return will be different to the expected return. As a long-term investment, your super will be exposed to many market cycles and different levels of risk.
If you don’t plan on accessing your super any time soon, putting your money into an investment option that is exposed to growth assets could be a great way to maximise your super’s potential.
But if you’re planning to access your super in the next few years, you might not have the time to ride out the market volatility. In that case, a defensive investment strategy might help you better protect your money.
Building blocks
It’s important to spread your money across different types of assets which is called diversification. Diversification can reduce investment risk as asset classes tend to perform differently at different points in the economic cycle.
All of our diversified investment options are invested across a range of asset classes with the current and target mix for each option available.
Below is some additional information on the main asset classes that we invest in.
Guidelines for measuring investment risk
The super industry has developed guidelines for measuring investment risk. The purpose is to have a consistent approach to risk measurement so comparisons of different investment options are more valid and meaningful.
Read the industry guidance paper.
The Standard Risk Measure (SRM) allows you to compare investment options that are expected to deliver a similar number of negative annual returns over a 20-year period within and across funds.
It’s important to keep in mind that this won’t give you a complete or accurate picture of your investment risk. For example, the SRM doesn't take into account how large a loss might be, or how well an option is likely to perform based on its ranking.
Standard Risk Measure | ||
---|---|---|
Risk band | Risk label | Estimated number of years of negative annual returns over any 20 year period |
1 | Very low | Less than 0.5 |
2 | Low | 0.5 to less than 1 |
3 | Low to medium | 1 to less than 2 |
4 | Medium | 2 to less than 3 |
5 | Medium to high | 3 to less than 4 |
6 | High | 4 to less than 6 |
7 | Very high | 6 or greater |
What you need to know
The Standard Risk Measure approach has been based on:
- Long term strategic asset allocations for the fund’s investment options
- Forward looking asset class assumptions
- Returns after tax and investment management fees but before administration fees
After tax returns
While it is recommended that the disclosure of these risk measures is before tax (ignoring the impact of franking credits and other tax), we have chosen to use after-tax calculations to provide for the impact of franking credits and other taxes, where applicable. This means that some investments with exposure to Australian equities have a lower risk rating.
However, we believe this provides a more realistic comparison between investment options as investment returns are credited to member accounts after tax and investment management expenses.
What Standard Risk Measures have been applied to our investment options?
The Standard Risk Measures applied to our investment options are shown in the Member Booklet Supplement: Investments (for accumulation members) and the Member Booklet Transition to Retirement Income Stream or the Member Booklet Retirement Income Stream (for income stream members).
The above Product Disclosure Statements retain the First State Super branding and trustee name. For more information on the change of our brand and trustee name to Aware Super Pty Ltd see here.
Managing investment volatility
Market volatility and fluctuating returns are a normal part of the investment cycle. While you’ll never be able to eliminate volatility entirely, there are ways to manage it and even make it work in your favour. See our ‘Managing investment volatility’ fact sheet for more information.