Skip to main content

To grow your super over the long term, you need to take some risk. It’s important to understand the level of risk of the different investment options, both for short time periods and longer periods. 

Key points:
 

  • The value of your investments can go up and down, and so can your super balance.
  • All investments carry a level of risk. The level of risk depends largely on the type of investments (known as asset classes) you’re invested in.
  • The risks you need to consider may be different depending on how long you plan to invest and when you will begin drawing an income from your super.
  • A key risk over shorter time periods is market volatility - investment prices going up and down. 
  • A key risk over longer periods is that your investments don’t generate a sufficient return above inflation to stay ahead of the rising cost of living. 
  • Each investment option has a short-term and long-term risk measure. You can find these in the relevant Product Disclosure Statement or Handbook.
  • The risk measures are estimates only and are not guaranteed. Actual outcomes may differ significantly from estimates.
  • When you choose an investment option make sure you’re comfortable with the risks and potential losses.

Short-term risk - market volatility

A key risk to your super savings over shorter time periods (less than 5 years) is market volatility. This is the risk of market ups and downs reducing the value of your savings. 

In general, the higher the long-term return you’re aiming for, the greater the risk of the value of your investment going up and down in the short term. For example, share investments have the potential to produce strong long-term returns. However, their returns can be volatile in the short term which can make for a bumpy ride. As a result, returns from investment options with a high allocation to shares and other growth assets can vary a lot, and there’s a greater chance of a negative return in any one year. By comparison, options which invest mostly in defensive assets, like cash and fixed income (bonds), tend to produce lower, but more stable, returns.

Short-term risk is also known as the Standard Risk Measure (SRM). It provides an estimate of how many times an investment option might experience a negative annual return in any 20-year period. It helps you to compare different investment options within and across funds. 

The SRM for each of our investment options is based on two things:

  • asset class risk and return expectations, and
  • an option's investment mix.
     

The table below shows the risk measures including a corresponding:

  • risk band – ranging from 1 to 7, where 1 is the lowest risk and 7 is the highest risk, and
  • risk label – ranging from Very Low to Very High

Standard Risk Measures

Scroll table horizontally on mobile

Risk band

Risk label

Estimated number 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


Limitations of the Standard Risk Measure

The Standard Risk Measure can help you compare investment options. However, it’s not a complete assessment of all forms of investment risk. For instance, it doesn’t take into account:

  • how large a loss might be,
  • the impact of administration fees and tax (including franking credits), or 
  • the potential for a positive return to be less than you may require to meet your retirement objectives. 


You should make sure you’re comfortable with the risks and potential losses associated with your chosen investment option(s).

Long-term risk – returns being less than required 

Given for most people super is a long-term investment – even in retirement –market ups and downs aren’t the only risk to consider. A key risk over longer periods (10 years+) is that your investments don’t generate a sufficient return above inflation to stay ahead of the rising cost of living over time (i.e. inflation). This is a key risk to consider because it could mean you aren’t able to maintain your current lifestyle in retirement (for those still working), or your super doesn’t last (for those already retired).  

The long-term risk measure provides an indication of the likelihood of returns from an investment option being less than CPI (inflation) +3.5% per annum. This is the approximate return the average member is likely to require from their super to be able to achieve, and then maintain, their current lifestyle in retirement.* 

Similar to the SRM, long-term risk levels range from 1 to 7. See the below table for details. 

Scroll table horizontally on mobile

Risk band

Risk label

% chance of underperforming CPI + 3.5% p.a.1

1 Very Low 0% to less than 5%
2 Low 5% to less than 20%
3 Low to Medium 20% to less than 40%
4 Medium 40% to less than 60%
5 Medium to High 60% to less than 80%
6 High 80% to less than 95%
7 Very High Greater than 95%


Investment options with a lower long-term risk band and label are most likely to generate returns above inflation over the long term

*This is based on Aware Super modelling, September 2024. Refer to the ‘Key assumptions’ below for more information.

1 The likelihood of underperforming CPI + 3.5% p.a. is measured over both the next 10 and 20 years. The relevant risk band and risk label is assigned to each option based on the average of the two periods.

Limitations of the long-term risk measure

The long-term risk measure allows members to compare investment options that are expected to deliver different levels of long-term investment returns. However, it is not a complete assessment of all forms of investment risk. For instance:

  • it doesn’t take into account how much a return could be less than the benchmark return, or the possibility for a return to be negative. 
  • it relies on the assumptions listed above which may differ from your personal circumstances/ actual outcomes.


As with the short-term risk measure, you should make sure you’re comfortable with the risks and potential losses associated with your chosen investment option(s).

Risk measures for our investment options

You can find the short-term (Standard Risk Measures) and long-term risk measures for our investment options and MySuper Lifecycle stages in the below Product Disclosure Statement documents:


We review the risk measures of each of our investment options annually, or more frequently if there is a material change.

Frequently asked questions

Where to next?

Understand investment basics

Super is a long-term investment for your future. Understanding how investments work can help you make better investment choices. This can make you feel confident that you’re on the right track to reach your retirement goals.

Change investment options

You can switch your investment options at any time. There is no charge for switching investment options.

Get help deciding the best investment option for you

At Aware Super, we can help you with questions about how to get the most out of your super. You can also pay for financial advice tailored to your specific needs.